Zeitgeist: 2016 in quotes

COPING WITH ECONOMIC VOLATILITY

"Since 2008-2009, global trade has really slowed and it's going to be slower because of this increase in protectionism. That's why we're saying we should focus on businesses that tap a domestic market and focus on Asia. There are many uncertainties, but we should be focusing on the underlying trends that have been moving - and this election may reinforce that trend"

Ming Lu, KKR

"The key is to build a businesses that can handle complexity and can go into different places. You don't want to be captive to single markets, and you don't want to be captive to where the crowd is. We spend a lot of time thinking about building a global platform that can really go deep"

Ilfryn Carstairs, Värde Partners

"Volatility became a bit of a bad word coming out of the global financial crisis whereas in the long term sense for investors, volatility should be our friend. If you define volatility as potential for great transformation in earnings of companies, then I think is good. As long as you price it right when you buy it and you have a patient view, you can capitalize on it. It shouldn't be something we're avoiding as an industry"

David Gross-Loh, Bain Capital

RESPONDING TO CHALLENGES IN A TIMELY FASHION

"Particularly in volatile times, you need to have a mindset of being extremely proactive and taking action before you need to. If you're forced into a position where you have to take action, you're already in trouble"

James Ahn, CD&R Asia

"You plan for five years, but it's going to be seven unless you do something different - that knowledge has led to a focus on time as a metric and rapid results. Never be in a position where you have to take the whole portfolio through a big black swan event. We're very oriented now around speed"

Nick Bloy, Navis Capital Partners

"Moving quickly is important because usually we get called in pretty late, particularly with minority situations, it's almost a last resort. The later it is, the fewer options you have. There's less cash, and you really get constrained by that"

Oliver Stratton, Alvarez & Marsal

LPS AND NON-TRADITIONAL INVESTMENT STRUCTURES FOR PRIVATE EQUITY

"Committing to a fund investment is one of the tools we have for private equity but it's a pretty inefficient tool from an LP perspective. You don't have control over capital, you can't play in and out of themes. If I think India is going to be a big theme for the next five years I can put some capital there but that is about as narrow as you can be. We need to have other tools in the toolkit to scale into things"

Steve Byrom, Future Fund

WHY GPS MUST TAKE A LONG-TERM APPROACH TO ESG

"PE guys get ESG in that they care about waste and they care about labor strife, but they don't pay enough attention to governance. The real challenge is doing a better job setting up governance when they take the company public or sell to another GP. They hand it over with an all-male board... but you need diversity as a risk mitigation tool"

Christopher Ailman, California State Teachers' Retirement System

"There is an old-fashioned way of looking at investment which is very short term-focused. Shifting focus to a long-term universal owner way of looking at investment returns is going to be the way forward"

Priya Mathur, California Public Employees' Retirement System

"What is most important is trying to find out if ESG is in the GP's investment beliefs; there is still a lot of lip service out there. If GPs don't think it is important, that's fine, but they won't get our money"

Anders Strömblad, Second Swedish National Pension Fund

"When working with GPs to get them ready for fundraising, there is a need to focus on ESG, and those in the LP community that really embrace it want to talk about it; but you also risk of scaring away some LPs. A lot of LPs don't want to talk about that because they think it has a negative impact on returns, whereas really it improves returns"

Veronica John, Diamond Dragon Advisors

NORTH ASIAN LPS, PRIVATE EQUITY AND YIELD

"You start with a particular amount of capital but you have to make ongoing commitments and have diversification. You try to go by size, strategy, sector, and geography, and diversify the vintage years - and time is a major factor that might be a hurdle for institutional investors. You need to ask yourself whether your organization is able to be patient in reaping the harvest of your investments"

Shuzo Takahashi, Pension Fund Association

"Japanese pension funds need to generate a certain amount of expected returns and it is getting tougher. They can take the liquidity risk so they are going into private equity and infrastructure. There is merit to going into alternative asset classes"

Tadasu Matsuo, Daido Life Insurance

"Most CIOs in groups like ours have three-year terms. If I say I invested $1 billion in buyouts [the board] is not interested; they are only interested in how much we have earned and so we have to get more cash coupons. That is why we are here"

Taebok Kang, Korean Teachers' Credit Union

"You cannot ignore the fact that we have our own benchmarks and target returns," Kim said. "Within a year we have to realize a certain level of returns and that means private debt, whether senior or mezzanine"

Taehyeong Kim, Korea Teachers' Pension

MID-MARKET DEAL FLOW IN JAPAN

"For SMEs [small and medium-sized enterprises], business sentiment compared to a few years ago has improved dramatically. But it is getting difficult for owners to secure headcount, and that is one of the reasons why we see an increasing number of sale transactions"

Gregory Hara, J-Star

"Working on a one-to-one basis we can spend 1-2 months fully reviewing the company and manage the risk in totality. Two months before closing we come up with a business development plan and by the time we have signed the documentation this plan is with the managers"

Jun Tsusaka, NSSK

RAISING CAPITAL FROM FAMILY OFFICES

"We don't like GPs coming to us and saying, ‘It's a final close and you have two weeks to decide.' It is easier when we know them for a year and we know where they are going. If we just have 2-3 weeks, there is a high probability we wouldn't invest, even if it is a great fund"

Alexander Pestalozzi, Mueller Asia

"You need to start talking to the purpose for the patriarch. What is in it for him? Does he want to educate his kids? Are they interested in philanthropy? If you can do this you can start to have a conversion with a person who has made a lot of money but who may not know private equity that well"

Fintan Maher, Myer Family Company

"If you can spend the majority of the introduction listening and understanding who is sitting across the room from you, when it comes to introducing your fund you can do it in their terms"

Christopher Thorne, Broadline Capital

"I look at investments in the opposite way to consultants. Consultants like to put everything into buckets; I like to invest with people who have flexibility and have the ability to change their strategy as they go along because the world changes. Consultants have a role to play with large institutional investors that have a top-down approach"

Rosemary Sagar, Kingdon Foundation

UNSUSTAINABLE TECHNOLOGY UNICORNS IN CHINA

"Over the next 5-10 years, there will be more unicorns emerging in China. In the past, internet companies relied on advertising to generate income, but that pool of capital is limited in size. In today's world, start-ups are generating fees from each transaction. The more they transact, the more they can get. So unicorns will emerge from a variety of large sectors, such as real estate, given each industry is worth trillions of renminbi"

Xiang Gao, Banyan Capital

"Companies in China are addressing a huge market, which still requires a lot of capital. Nowadays these companies will not just be funded domestically. They aren't restricted to venture capital; they are going beyond that to look for strategic capital or private equity funding. When you're in a large market, you see diversity in the investor base"

Jenny Lee, GGV Capital

"There are two types of bubble - soap bubbles and beer bubbles. Soap bubble-like companies look beautiful. They could raise a large amount of capital, but they burn a lot of cash too. When the bubble bursts, it leaves nothing. The second type is the overvalued company, which looks like a glass of beer with a large head of foam. But after clearing the foam, it's still drinkable" 

David Wei, Vision Knight Capital

"There are three types of companies we won't invest in. First is if they rely on a large supply of labor. China's population declined 20% between the 1980s and 1990s, and 15% between the 1990s and 2000s. That means there will be a lack of supply in labor. The second type is the company that relies on intensive fundraising but can't generate cash organically. Third, we avoid companies that depend too much on government policy"

Richard Ji, All-Stars Investment

GETTING TRACTION IN THE PHILIPPINES

"In many markets PE has not been so successful and it stills struggles with that history, but the Philippines is a new and exciting market. So it's really up to private equity firms to differentiate what they stand for and how they can benefit companies and management teams"

Florian Marquis, Partners Group

"When PE funds look at family businesses to partner with, a big part of the diligence is trying to figure out if there is a fit in terms of culture and personalities. It has to work from an organizational and governance perspective - not just from a financial perspective"

Paolo Maximo Borromeo, Ayala Corporation

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