Zeitgeist: 2020 in quotes

WHERE CHINESE COMPANIES SHOULD LIST 

"The good news for Chinese technology companies is they have more options. They can go to Hong Kong or the Shanghai tech board, and now the Shenzhen SME board has new regulations to encourage technology companies without profit to list. Investors will be more cautious, but the best companies will always standout" 

Mingming Huang, Future Capital

"Many companies we look at are gearing up for IPO on [the Star Market] instead of Hong Kong or the US, where they have geopolitical concerns. The change in the approval process in China – instead of going through a lengthy approval process, now you can just register – means there is a lot more certainty in terms of being able to predict when you can list and when you can get out."

Chang Sun, TPG

"We are hearing all these mixed signals and the bankers have been telling us that the US listings are not affected. But people must figure out whether it is a long-term sustainable solution for Chinese companies. Hong Kong is becoming a more and more viable market, where valuations are in favor of investors"

Frank Tang, FountainVest Partners

"When they went IPO in early years the business models were copied from the US, so US investors were more familiar with the business models. Companies chose the US because investors were more sophisticated. Now we see a loosening of listing requirements and more innovative business models coming out of China and an increasing sophistication among local investors. Chinese companies do not need NASDAQ to list"

Tianhao Wu, Rockefeller University

"As fiduciaries we have to understand better what a dual circulation strategy [whereby China would rely on domestic production, distribution, and consumption to support its development, with innovation and industrial upgrades underpinning growth] might mean for LPs and spend more time thinking about portfolio construction from that perspective, not worrying about Chinese companies being forced to delist in the US" 

Edward J. Grefenstette, The Dietrich Foundation

 

HEALTHCARE EXPERTS ON COVID-19

"When this winter season hits, a lot of the issues around insurance, vaccines, and manufacturing to make the vaccines will be compounded. I think you're going to see a lot more nationalism coming up where governments are going to hoard vaccines, leaving places like Southeast Asia especially vulnerable"

Jeff Staples, United Family Healthcare

"Governments probably need to realize there is a need for a business model in infectious disease, a commercial business model that actually works. We've seen it in antibacterials where lots of companies went bust even when the need for novel antibiotics was rising exponentially"

Helmut Schuehsler, TVM Capital Healthcare

 

DUE DILIGENCE ISSUES FOR LPs

"The willingness to do more virtually has been adopted across the board. I have done many AGMs and some of them have been fantastic – everyone is learning from each other on how to make the experience rewarding and differentiated. However, long term, the need to meet in person and spend time in the office is real. We have yet to cross the line of would we do something without going on site"

Alicia Gregory, Future Fund

"It takes a long time for a new manager to get into the fund, but how do you replenish that fund if [the pandemic] lasts for a number of years?"

Sam Robinson, Northeast Private Equity Asia

 

EVOLVING APPROACHES TO ESG

"Reporting is very much now moving away from ‘what are your policies and process' to ‘what difference has it made, how have you reduced energy, how is your staff performing better and therefore making companies perform better.' It's those outcomes and case studies that demonstrate what you're doing is having an impact"

David Russell, USS Investment Management

"They're going to have to decide, do you carbon footprint your entire portfolio? How do you think about applying materiality? How do you deal with supply chains? It's a complex area, and it's going to require real costs. Standardization has got to be a priority for the industry in this regard" 

Suzanne Tavill, Stepstone Group

"I think we're now at the point of no return with ESG. It's been so embedded into LPs' investment processes that there's no going back to the point where people cared only about pure returns"

Ana Lei Ortiz, Hamilton Lane

 

DISTRESS AND THE WAITING GAME

"There are opportunities in sectors pre-COVID and we were willing to pay for those opportunities. "The real issue now is how has the COVID situation affected the business model and economics going forward?"

Yong Kai Wong, CITIC Capital

"Those planes [at restructuring target Trans Maldivian Airlines] are sitting there at the moment not doing much at all. At what point do people return to leisure travel? How quickly does it pick up? For owners and bankers, how do you decide how much money is required and what the value will be down the road for an exit?"

Jason Kardachi, Borrelli Walsh

"I think the market is really confusing solvency with liquidity. Most companies, even if they're doing well, are burning through cash, and we expect the default rate to go up in the middle to end of next year. We think there's going to be a big opportunity to deploy capital, and a lot of that is going to be in the private markets"

Ted Goldthorpe, BC Partners

 

LPs CO-UNDERWRITING DEALS

"That is beyond where we expect to go, at least in the medium term. We are not going full Canadian. We have a hybrid model of partnership. We are selecting GPs because we think we have found someone with a really differentiated view of the world, they know their market in a special way. That's what we are buying into. Co-investment allows us to fiddle around the edges, but we are led by the people in those firms"

Will MacAulay, HESTA

"We are not looking to re-underwrite deals. Why would you do that? It's what the GP is there for. You have underwritten their team, strategy and process. You've got to test them – ask questions, understand the deal – but you can't say your whole investment thesis is wrong and then come up with a different one, that wouldn't make any sense"

James Lilico, Sunsuper

"We would get the odd thing shown to us by a manager, but we always feared adverse selection if it was coming our way and we didn't have a relationship with the GP at the fund level. Why would they show it to us if they had already been around the tracks of their own LPs? You could say that after consolidation and the attempt at internalization, we are now back full circle and looking at our options in terms of new GP relationships and how we can do more of a co-investment model" 

Hamish Blackman, NZ Super

 

PRIVATE EQUITY WORKING FROM HOME

"It's amazing how six months has really changed people's behavior. We do a lot of night calls in Asia because we're part of a global firm. We used always to come into the office for video calls and it couldn't be any other way. Today, everyone is so comfortable globally dialing in from home. It is almost easier to connect with colleagues globally"

Wendy Zhu, AlpInvest Partners

"Regardless of whether women have children or not, working from home is exacerbating how women can feel less visible than men in the workplace in general. As a result, women feel they must work harder or go that extra mile just to get noticed or recognized for that extra work they are doing, especially if working at home unseen."

Denise Mak, CVC Capital Partners

"You are expected to be available 24-7, which leads to burnout"

Judith Li, Lilly Asia Ventures

 

CHALLENGING TIMES FOR ENTREPRENEURS

"We are doing many things we never thought we could do from home. We have been fundraising from home – all the due diligence is done from home. We expanded into 21 cities across Indonesia, all coordinated from home. I could never have imagined it happening before this year. We even expanded into another country in Southeast Asia, doing it remotely, without being able to visit that country at all"

Christopher Madiam, Sociolla

"Communication is important, how you manage your stakeholders in this uncertain period. People panic. Your investors, your employees who don't know what is going on and what will happen to them. You must discuss your expectations, your plan, your plan B if plan A doesn't work. That gets more and more important, making sure people are aligned and supportive"

Chris Ning, Tencent Investments

"Entrepreneurship is a very lonely journey. It turns out it gets lonelier the more successful you become. In some ways, when founders are early on in their life, they have a lot of people to lean on but when you have founders running companies with hundreds of employees and very high visibility they do not have as many closed relationships with people that they can have deeply personal and important conversations"

Abheek Anand, Sequoia Capital India

"At this point everyone knows it's a crisis, and those who acted decisively at the beginning of the crisis, right now they are getting benefits out of it. Why? If you do something drastic at the beginning of the crisis, the mentality and morale of your existing team members can recover. Whether there is a second downturn or not, everyone is well prepared. These are key factors when we decide to double down on some start-ups"

Wilson Cuaca, East Ventures

 

THE IMPORTANCE OF CONTROL

"I've always been of the view that the kind of growth capital models we have in Asia are probably not sustainable in the long run. In the long term, Asian managers will need to develop specializations and sector expertise like in the West. Managers that actually know what to do to help their companies navigate a crisis are really the ones that can sustain themselves and their returns"

Andress Goh, Allianz Capital Partners

"During times of recession, being able to be in a position to create value and take hard actions – and the experience that comes with investing with control – starts to show benefits. So, we have been looking at ways to diversify. We have a pretty diversified portfolio across growth versus traditional buyout both in the growth markets as well as the developed markets. And we've definitely benefited from that diversity"

Raju Ruparelia, Ontario Teachers' Pension Plan

"We are starting to see some GPs in China having more of a control orientated focus, and if that continues, I see our allocations to China potentially increasing a bit in the future. But for us at the moment, reliability of distributions is important. If you have a control orientated focus, you have a greater control of the exit process, a broader range of exit avenues, and that's what you want to see GPs tap into"

Nick Milnes, MetLife

 

BEST PRACTICES IN GP RECRUITMENT

"It has to be an organization where people are proud to work, and where people want to wake up every day and make a difference. You want to have an organization that is deeply embedded in various aspects of the community for recruiting talent – from college grads and business school grads to proven industry executives – or taking people from different industries and converting them into investors through training and education. If you can do that, you have the basis to build a business for not just 100 years but 500 years"

Jun Tsusaka, NSSK

"What we're trying to do is create a repeatable business model by reducing the dependence on any one individual. For a GP to be truly sustainable, it needs to go beyond a group of individuals and move to an organization that can bring people through in a culture and survive the departure of any one of those people"

Jeremy Stevenson, CPE Capital

"We need people that are action-oriented, people who get things done and do it quickly. Secondly, we need people who are intellectually adventuresome. More than just having curiosity, they are aggressive in trying to learn about things. They're hungry for knowledge and looking for new ways to do things. Third would be probity, which speaks to things like honesty and decency as a human being. In our industry, you need to have a certain amount of honesty with your colleagues, portfolio company management, and LPs"

Kyle Shaw, Shaw Kwei & Partners

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• Topics
• Greater China
• South Asia
• Southeast Asia
• Australasia
• North Asia
• GPs
• LPs
• Deals
• Funds
• Asia