Investors adapt to adversity – AVCJ Forum

"We have become more specialized over time," said Robert Collan, vice president of Unigestion's private equity unit. "So we don't raise global fund-of-funds any more but we have raised smaller funds where we see dedicated opportunities."

In Asia the fund-of-funds manager's approach today is mixing established pan-Asian players with smaller, local funds that have some specialization. Unigestion has invested in KKR's $6 billion Asia Fund II but also in a small Indian healthcare fund, which is expected to raise $100-125 million.

"We didn't invest because we believe in India per se, but because we believe in the healthcare opportunity in emerging markets and based on our bottom-up approach we believe we found the best GP in Asia in healthcare," Collan explained.

He added that selecting top GPs poses more of a challenge in Asia than in the US or Europe because in the top-quartile returns are somewhat similar between the three regions, but in the median or third quartiles, there is a big difference in performance. Unigestion's solution has been to use a bottom-up approach to find specialized managers who have a good track record, irrespective of their region.

"Even though we have a certain allocation to Asia, the funds that I'm presenting to our investment committee are still competing with funds in Europe," Collan said. "If we don't expect higher returns in Asia then these GPs better have something special otherwise they won't get far with the investment committee in Geneva, which is fairly conservative."

There has been a similar change in focus in Europe, where exits have been challenging as well. Joseph Cohen, founding partner of Europe-focused Trilantic Capital Partners, noted that there had been a proliferation of funds on the continent, with little differential between different country risks on the banner of single currency and propelled by the banks and the high-yield markets.

With fewer funds managing to raise capital in the current environment, a good reputation is a key differentiator for access to deal flow as well as how a GP is perceived by management teams, sellers and partners.

So for GPs with a good track record, "in my view, in certain markets in Europe, the risk reward is the most compelling that I have personally seen in my time in private equity," Cohen said.

While there are opportunities for these players, it is important to be flexible across markets and be able to change investment strategy and theme. "Fundamentally, if you were country-focused or industry-focused, in media for example, you were in a very tight spot," Cohen said.

In terms of exits, the strategy at Trilantic is to continue identifying and working towards who the ultimate strategic owner of the asset is going to be. "You need to work hard to develop the profile of the business and being the bridge from the past to the future, to the two or three strategic buyers that you should have identified relatively early on in the investment," Cohen explained.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Europe
• Buyouts
• Exits
• Fundraising
• AVCJ Events
• Europe
• Asia
• Fundraising
• Exit
• buyout