Talking points: 2019 in quotes

CO-INVESTMENT

"When we moved to a more direct strategy, we were a relatively small investor from Australia trying to get into some access constrained opportunities. We were selling our prospects as an LP as much as they were selling to us. It comes down to developing partnerships and making sure GPs know we can add value to them"

Andrew Major, HESTA

"At Carlyle, apart from really large co-investors like GIC Private, the co-investors were not involved in anything they were co-investing in. But we have an active dialogue with our co-investors, and they ask how they can help"

Simon Moore, Colinton Capital

"Some LPs are happy to follow us into whatever investment we have decided on with limited due diligence while others want to get into it more. The main thing we focus on is having consistency in the prosecution of outcomes"

Shannon Wolfers, Pacific Equity Partners

"I'm sure many GPs around the room will take it with a pinch of salt sometimes and be a bit nervous about having to rely on a co-investment syndicate to be able to fill their cap table. I think there are a lot of people who raise their hands and say, ‘We want to do co-investments,' but there are few that are actually able to execute at the timelines of a GP"

Brian Lim, Pantheon

"In the past, when we have worked with a GP as a large investor, they have not distributed co-investment fairly. You have to be aggressive and tell them you are interested. Even when we are big, their fund sizes are bigger. They look at their investor base and give opportunities to CPPIB [Canada Pension Plan Investment Board], which makes the largest [fund] commitments"

James Kim, Korea Investment Corporation

"My large LPs come to see me and as soon as we sit down, before the coffee is served, they ask, ‘Where is my next co-investment?' "When the market changes I wonder how many of these guys will drop back"

K.Y. Tang, Affinity Equity Partners

"Groups focus on co-investment to drive returns and reduce costs, but they need people who have experience of making decisions and putting capital at risk. It is easier to teach a direct investor how to do fund investing than the other way around"

David Simons, Potentum Partners

CONSUMER TECH IN VIETNAM

"Technology is becoming so pervasive across every segment as consumption grows. E-commerce in Vietnam was worth $400 million three years ago, $2.8 billion last year, and it is projected to reach $15 billion within six years. The underlying infrastructure required to support that level of growth is huge"

David Gowdey, Jungle Ventures

"If you look at the statistics, the reality is that in terms of population, consumption and GDP growth, Vietnam is growing faster than China, but it hasn't got the same size and scale. However, five to 10 years from now, consumption is going to be huge"

Rebekah Woo, Fosun Group

"Consumers in Vietnam are very discerning, very informed and they want to avoid the food scandals that have happened in China. I am surprised by how quickly this has happened. The regulators have raised the bar and improved enforcement of standards"

Melissa Kang, Jupiter Impact Partners

"We have looked at almost 100 companies in the last five years and there can be operational challenges. Is there regulatory clarity? Is there sufficient quality in the team to go from start-up to massive business? Is there a technology baseline we can build on or do we have to rebuild it? We due diligence these areas heavily"

Shane Chesson, Openspace Ventures

GPs & SELF AWARENESS

"Growth covered a multitude of inefficiencies in operating dynamics and structure. In a slower growth economy, we are looking for managers to be able to demonstrate expertise that is less about the revenue line and more about the expense line. This is not a muscle that has necessarily been exercised by a lot of local GPs in the past"

Peter Keehn, Allstate

"I would like to hear a GP say, ‘I'll tell you exactly how it happens – it's because we underestimated the competitive environment, it's because we overpaid, it's because we lost discipline and shifted strategy into another sector.' I would like to hear a GP articulate how their strategy might fail because as a result, they are less likely to trip up on those risks"

Edward Grefenstette, The Dietrich Foundation

"When GPs are fundraising everyone is happy, putting on smiles, but in almost all cases, if something goes wrong it's because team members leave or because the team doesn't work as a team anymore. The average marriage in the US lasts seven years. The average in our portfolio is 12-plus years. You are assuming that your team is going to work together for longer than the average marriage"

Ralph Keitel, IFC

INDIA BUYOUTS

"Seven to 10 years ago, a start-up would have $10 million in revenue and we were the first institutional check – it was 100% founder-owned. Start-ups today are usually majority-owned by venture capital firms and a lot more expensive. It is increasingly difficult for entrepreneurs to hang on to companies when they start out on day one with an equity check. This is changing attitudes"

Gopal Jain, Gaja Capital

"When the promoter owns the company and third-party investors come in, the questions we are asked are about corporate governance, IT systems, strategy, quality of management, and ethics. Where there is already an investor, those questions are not asked as much"

Nittish Poddar, KPMG

"He turned to me and said, ‘Why are there so many obligations on me?' I explained that typically these obligations flow in the same direction as the flow of cash, to which he responded, ‘How dare you commoditize my daughter.' I was lost. He explained that his company was like his daughter and I had put a price on her"

Mithun Thanks, Shardul Amarchand Mangaldas

LONG-DATED FUNDS

"A lot of companies are choosing to stay private. The incentive to go public was about access to capital, but now there is more access to capital in the private markets, why would you do it? If you are a ‘core' company, you could stay in private equity for a long time. But how are these products set up and how are they going to charge?"

Kate Misic, Telstra Super

"The issue we face is that to partner with a GP on a long-term basis it is hard to get the incentives right for them. They are happy to manage the asset for 10-15 years, and that's fine on a management fee basis, but getting the carry to work on that basis is difficult. You probably have to pay some of it along the way, so it starts to look more like a short-term buyout fund"

Stan Kolenc, OPTrust

"I do think there is suspicion in the market as to why these vehicles are out there, but there are multiple companies that want to stay private and can provide long-term growth opportunities. Maybe it's not a 20% return, but 14-15%, and maybe they have less leverage, not 5-6x but 3x, and maybe you can have a dividend policy"

Lynn Baranski, BlackRock Private Equity Partners

GOVERNANCE & MANAGEMENT

"We face it every time we invest in a family-owned company that thinks that because they are the first generation of the business, they can manage it better than anyone else. I think the biggest challenge we face is overcoming this inertia and persuading management to accept a change"

Mohit Ralhan, TIW Private Equity

"As a control investor, if we buy a company and keep all the same management, nothing is going to change. As soon as you change the C-level, you can have up-front clarity with the management team on what you want to do with the company. You may not always make the right decisions, but you need to be decisive with your team"

Brian Lau, Shaw Kwei & Partners

CHANGE IN CHINA TECH

"As a minority investor, we think the best way for us to do risk control is to not to invest. Currently, a lot of investors are driven by FOMO [fear of missing out] and feel they have to pile in if a company has attracted a lot of attention and capital. For enterprises, while their revenue and cost increases can be calculated, their valuations usually don't rise that quickly. As an investor, you should be patient and wait for valuations to catch up with its performance, instead of piling because of the pressure of money burning a hole in your pocket"

Jing Hong, Gaocheng Capital

"We have invested heavily in content creation companies recently. A lot of people might argue there is too much uncertainty surrounding this segment, but I have strong faith in it as the era of buying traffic by burning cash has already passed in China. Now you need to attract consumers through good quality content"

Linda Cai, Loyal Valley Capital

"Buyers are getting careful about what they buy. Are you buying a brand name, management, cash flow, or what exactly? What happened with WeWork has caused everybody to ask, ‘What are you paying for?' If it's a company with a great business model, but it still has not registered profitability, that will give people more caution when paying high valuations"

Teck Sien Lau, Hopu Investments

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

• Topics
• Greater China
• South Asia
• Southeast Asia
• Buyouts
• GPs
• LPs
• China
• India
• Vietnam
• Co-investment