Experienced GPs make India more attractive - AVCJ Forum

Part of the reason for this increase in confidence is the ability of LPs to examine the track record of potential investee funds, according to Alagappan Murugappan, CDC Group's managing director for Asia. For instance, an LP can use data on turnover rate to identify GPs that are less likely to have built an effective team.

"Specialization of the managers has also increased. Most group managers focus on a few sectors, and they don't do things opportunistically," said Murugappan. "So while it has its ups and downs depending on the cycle, I think over the long term having specialization and actually involving yourself with those companies is becoming important."

Edouard Merette, the Asia Pacific managing director at Caisse de dépôt et placement du Québec (CDPQ), also views developments in the country positively, though his firm feels there is still room for improvement as it pursues its model, which requires long-term development of relationships with potential GPs.

"Relationships in this part of the world are very important, and you don't get a relationship after a meeting or after a sales pitch. So you have to work at it," said Merette.

One troubled area remains, in the form of exits. Haide Lui, a principal at Harbourvest Partners, believes that while exits can be done quickly due to the market's high liquidity, the real danger is that the opportunities will not be there.

"In terms of exits India has always lagged, and there's an overhang of countries that GPs have invested in, but are finding it quite difficult to return the capital," said Lui. "So I would probably say that the concern is more over exits, rather than liquidity per se."

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