He said, she said: 2017 in quotes

ON CHANGES IN CHINA

“Whatever uncertainty you think there is, one thing cannot be more certain: China has the largest and fastest-growing middle class in the world, which is expected to grow from 250 million to 500 million people over the next five years. These people are looking to consume better products and services. You just have to make sure you are investing in the right segments of the economy”

Hugh Li, GenBridge Capital

“People still underestimate the potential of China to grow by improving productivity. They underestimate the potential of innovation and the commitment to this, not just from tech entrepreneurs but also from traditional entrepreneurs and the government, which is improving productivity by pouring billions of dollars of capital into areas such as next-generation manufacturing, artificial intelligence, and data centers”    

Jing Hong, Hillhouse Capital

“Deal sizes are getting larger. Some of it is structural, companies are on average getting larger, and they are usually still growing in some form or another. But we also see succession planning situations, and a lot of these companies are either already global or competing globally”

Edward Huang, The Blackstone Group

ON PE FIRMS AND TECHNOLOGY

“We almost missed [an investment] because of our policy, so we decided that the tech space in China was too important to ignore even for a buyout firm. You really have to be very steeped in the tech sector and have people who are knowledgeable to take advantage of those opportunities, but if you do, then the pay-off can be enormous”                   

Weijian Shan, PAG Asia Capital

 “I think the tech sector in China is going through a bubble right now. You are benefiting from it but for new capital looking to invest today it is really a bubble, so you need to be very careful”

Jean Eric Salata, Baring Private Equity Asia

“I was talking to a local investment bank with a huge market share in the TMT space for private placements and I asked how these deals get done. He said, ‘We have a couple of very active players and in extreme cases they leave a blank term sheet and ask us to fill in the valuation.’ Meituan-Dianping did a $5 billion placement and three guys covered most of it… But if [a company] has that kind of market dominance, maybe you should take a leap of faith”                        

Chang Sun, TPG Capital

“You have to figure out how to play the new economy, which technologies can you adopt and what can you do to modify your business model to adapt to the disruptive models that are coming out. You can never run away from technology. You have to swim and play with the sharks or be eaten alive”

K.Y. Tang, Affinity Equity Partners

ON CARVE-OUTS IN JAPAN & KOREA

“What’s unique about Japan is that it’s not the end of the story after the business is sold off. That is not the mindset of management. They are interested in the future of the business and how corporate value will be enhanced. This is how PE firms can differentiate themselves”

Kazuhiro Yamada, The Carlyle Group

“It’s not that management teams in Japan aren’t doing a good job, but there are different objectives at play. Japanese companies stress profitability but they still prioritize business size. For investors like ourselves, profitability is most important. That is why we believe there is a lot of room to make improvements and in that sense we can be very aggressive these days chasing deals”                      

Atsushi Akaike, CVC Capital Partners

“We have to be very selective when seeking spin-off assets, especially if the seller is selling on the basis of restructuring. Often, they aren’t selling the best assets; usually, things that aren’t going so well go to market first. Moreover, there is also more corporate culture complexity when buying assets from large groups. You can’t simply think management will execute a new strategic plan because you come in and take a majority interest. They might not listen to you”

T.J. Kono, Unison Capital

ON CORPORATE VC

“We’re a $30 million fund, and people used to ask, ‘Why are you not writing $50 million per check, when the group has access to significant amounts of capital? Why not look at iron ore, and why not look at steel processes?’ It took us time to establish that we are a technology fund, and what we do is very different than what the parent group does”

Gaurav Sachdeva, JSW Ventures

“What’s worked in our favor is actually being as divorced as possible from headquarters. When we do want to engage with our parent to have our start-ups work with our parent’s digital assets, then it’s on a case by case basis, and it’s purely based on a meritocracy. So we’ve taken a conscious approach to distancing ourselves and making sure that all of the liability and the successes for the financial performance rests purely with us”                       

Adit Swarup, Rakuten Ventures

“When it comes to the venture capital funds, that’s where I think everyone is a collaborator and not a competitor. They feel that they have a lot of early-stage investments that can be a target for us. That’s the way Fosun has positioned itself with all the early-stage investors, and I’m sure all our counterparts are doing that too”

Ajay Lakotia, Fosun Kinzon Capital

ON GP SPIN-OUTS

“The reason for me to spin out is very simple. I saw innovation really happening in China, but my English was not good enough to explain my global investment committee to back that kind of innovative start-up”

Wei Zhou, China Creation Ventures

“Healthcare services, an area that NEA was focused on in China, has moved significantly over the last three years. NEA invested in nine companies in that sector, mostly in Series A and B rounds, and many of these companies have gone from nothing to be worth billions of dollars today. What we need is a new way to organize ourselves – being independent but remaining connected with a global fund – in order to better pursue new opportunities”             

Xiaodong Jiang, Long Hill Capital

“We have done more work on China than other countries, but the speed of change is hard. You have guys spinning out of other guys, a lot of motion. We are getting better at following who is going where, but there is a lot of institutional change”              

Amy Falls, The Rockefeller University

ON POLITICS IN THE PHILIPPINES

“We may or may not agree with the actions of the government or the president but regardless, it has been a very democratic process, and I would say that for the last 10-15 years, it has been a smooth transition from government to government. That is a powerful macro factor that should not be discounted as one compares [the Philippines] to other countries”

Adrian Teng, Jardine Cycle & Carriage

“Not everybody voted for him, but the greater majority did, so are we just going to pull him down and make it worse? And you guys who invest in the Philippines will lose whatever you invested in. There’s no other way but to make him succeed – the more we bash this administration, it’s not going to help us. The people have spoken. Unless you want to have a coup, let’s try and help this administration”

Joey Concepcion, presidential advisor for entrepreneurship

“About 70% of our economy is accounted for by consumption. So whoever the president is, the people will still continue to consume and buy. We’re not afraid of politics”

Gladys Enhaynes, ICCP SBI Venture Partners

ON ESG

“We’ve had some managers come through the due diligence process where it’s clear it was just lip service and it was a check-the-box exercise. Whether it’s public markets, private markets, real estate, private equity or infrastructure, our staff is paying attention to that and already screening that out early on in their process. For us, it’s become critical”

Christopher Ailman, CalSTRS

“Firms that have dedicated ESG resources do make a difference because those people are focused 24/7 on these issues and they can design procedures and reporting for ESG internally. The only downside is that the team can think ‘that person is ESG and I’m a deal-doer so I don’t have to worry about that.’ The individual deal-doers need to appreciate that these are commercial risks, not just ESG risks”

Kathleen Bacon, HarbourVest Partners

ON THE GP-LP RELATIONSHIP

“LPs might have had 200-300 GPs in their portfolios. Today they want 50 or 20, or some number in between the two. They are trying to bring their core groups down. To do that they want to put more capital with their preferred GPs so they are trying to push them into strategies that are tangential to what they do in their core business. We are seeing some drift in these pure-play shops”  

Steve Byrom, Future Fund

“At the top of the market we are seeing more and more competition. It is harder for GPs to get deals done, but there is more money coming their way, so more dry powder is accumulating. The US pension funds are doing what is right for them, but it is making it more challenging, particularly at the top end of the market for those sorts of deals to get the returns we would expect private equity to generate over time”

Michael Weaver, SunSuper

“Capital’s not scarce, and capital pools are only growing, so competition for the seat at the table with the GPs is also growing. So you’re seeing the GP funds continue to rise in size, and so in order to be creative and in order to find other avenues for investment you need to find other pockets where you could create partnerships”

Raju Ruparella, Ontario Teachers’ Pension Plan

“You used to have just one model: GP-LP. Today it’s a partnership. Some investors are very happy to be passive, and probably can only be passive given the size of capital that they deploy. Others are extremely active, on the order of being like a general partner. So there’s more than one way to be very successful in this marketplace”

Ivan Vercoutere, LGT Capital Partners

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