Zeitgeist: The year in quotes

HAVING INFLUENCE AS A MINORITY INVESTOR

"You sit in the back seat, not the driver's seat. Before the investment committee takes the decision to make an investment you have to judge whether you are on the same page as management and the founder. Otherwise a minority position will be a weaker position, even if you have the ability to make operations stronger" - Mary Ma, Boyu Capital

"Having an alignment and common interest is the most critical part in minority situation. The other thing is that you can't have a mindset of ‘We know better, we step in and we want to transform the company.' You really have to focus on one or two things that really matter, and then you can help and bring in expertise as a minority shareholder, and create traction for change" - David He, PAG

"In many of these Asian family companies, having equity control in many cases is not the same as operating control. When working with a founder who has a minority stake you have to be careful to earn the right to help him in the way he sees fit. The demarcation line between growth capital and buyout is fuzzier than in the West" - Emmett Thomas, Advantage Partners

AUSTRALIAN LPS, FEES AND PE ALLOCATIONS

"Australia is beginning to look like New Zealand on this issue where superannuation funds are surrendering the opportunity to make returns to which their members are rightfully entitled" - Tim Sims, Pacific Equity Partners

"You go in to talk about fundraising but you spend 20-30 minutes talking about fees. It might be good therapy for investors to get it off their chests, but are you in this asset class or not? If you are in then it's up to you to deal with the fees" - John Brakey, Principle Advisory Services

"Instead of categorizing LPs as industry, corporate and retail funds, we should categorize them by membership demographics, cash flows and member switching. If you have these three characteristics [in your favor] it gives you a huge ability to do private equity and other long-term investments" - Neil Stanford, HOSTPLUS

THE JOKOWI EFFECT IN INDONESIA

"Jokowi has been very lucky. Oil prices are low, he is loved by the people... he really is a rock star. Everyone asked him during the election campaign how he was going to reform fuel subsidies and he said he would do it in three years, one third each year. But in the first three months he has completely reformed the system. Maybe it is better to be lucky than smart" - Sandiaga Uno, Saratoga Capital

CHINA TECH VALUATIONS AND EXITS

"There are a few unicorns emerging in China and their M&A activity is very vibrant. Asian markets, including Hong Kong, and the US market have given rich valuations to many VC-backed companies and people have made a lot of money. Therefore, people are getting greedier and greedier, which is driving a lot of deal activity and pushing up valuations" - J.P. Gan, Qiming Venture Partners

"The GEM board is open for business again and there is a lot of excitement about the NEEQ [National Equities Exchange and Quotations], the New Third Board. In 4-5 years' time you will see that engine is growing as well. A lot of the investment is not necessarily from the US dollar funds, but also on the renminbi side. For the first time in a long while, renminbi funds have viable exit paths. This is an interesting time" - Jeffery Chin, Vickers Venture Partners

"In the past, there was a lot dumb money. People invested in the areas in which they didn't have a lot of experience. At least now in the early stage, people have been working in the internet industry for a long time. Entrepreneurs have some exits and then they put the money back in. The money is smarter. Secondly, many of these companies have revenue, which is nice" - William Bao Bean, SOS Ventures

GREATER ACCEPTANCE OF PE BUYOUTS IN JAPAN

"If you look back 10 years, MBO was a dirty word, owners hated the idea. Now owners are happy to speak about it and there is no negative sentiment, they understand GPs can help grow their company" - Jun Tsusaka, NSSK

"It is more of psychological change that is driving these Japanese companies. Buyout funds are no longer seen as vultures seeking arbitrage, they are now considered as a good counterparty not only because of the capital they bring, but also because of the operational support they offer" - Hideo Nagatsuyu, Advantage Partners

"It can often take time, there isn't much transparency, and in many cases it doesn't always lead to a deal. But when dealing with founders we can build trust and there is a high likelihood of realizing a deal" - David Gross-Loh, Bain Capital

THE PROSPECTS FOR PRIVATE EQUITY IN THE PHILIPPINES

"Coming out of the global financial crisis the Philippines was one of the only countries in the world that could claim to have seen 42 consecutive quarters of positive GDP growth. The government did not have a spending problem; there is a surplus of foreign currency and the debt to GDP ratio is currently 45%, which is staggering when you consider what the global average is" - Brian Hong, CVC Capital Partners

"What is remarkable to us was that even though the stock market has 50% foreign participation we had an opportunity to be one of the first movers in the growth capital space" - Anders Stendebakken, Brummer

"We don't see the volume of investment we would expect given all the positive dynamics in this market. Over the last three years PE investment volume has been less than $1 billion, which is less than half of 1% of GDP - low in an Asian context ... If you wanted to start a private equity platform today you would put the Philippines on your list, but you have to be patient. It is not a 3-5 year window; it is a 10-25 year window" - Todd Freeland, Asian Development Bank

CHINA TRADE SALES

"I don't know if you can be confident that the market will still be at the current valuations three or more years from now. We cannot be dependent on A-share exits. The best channel is a Hong Kong listing or a trade sale" - Lihong Wang, Bain Capital

"It is a very long process and the return will not be as good as if we had listed the company directly on the A-share market. But when you factor in all the other considerations that was the best option for us" - Cathy Zhang, China International Capital Corporation

"The one-year shutdown in the domestic IPO market has made GPs realize that exit opportunities need to be grasped and the public markets are not always open. If a company goes public it should generate the highest returns but there are other considerations. We see GPs maturing and looking at a diverse range of exit paths" - Bonnie Lo, NewQuest Capital Partners

CORPORATE CARVE-OUTS IN KOREA

"Everyone hears about the 6-7 families that control 60-70% of GDP but beneath that tier there is a substantial effort focused on core assets. We are having conversations about where they want to allocate capital in their portfolio businesses and what they want to do because they cannot add value anymore" - Andrew Shinn, PAG

"There are some very smart people in these companies' strategy and M&A departments. They are looking at each business from an ROE (return on equity) perspective. They want to exit the low ROE businesses and focus on their core areas and compete with global players" - Joseph Lee, IMM Private Equity

CHANGES IN INDIA PRIVATE EQUITY

"We've held back in putting money into the market, one, while we wait for that capital overhang to clear itself, but two, to allow us to see the actual winners start emerging out of this industry. And I think we're beginning to see that now" - Steve Byrom, Future Fund

"There were some GPs who were aware of the risks, and would tell others about it, but sometimes the LPs would overlook that, saying, ‘No, that's fine, we see that everywhere else.' But it was a real risk in the Indian market" - M.K. Sinha, IDFC Alternatives

"Specialization of the managers has also increased. Most group managers focus on a few sectors, and they don't do things opportunistically. So while it has its ups and downs depending on the cycle, I think over the long term having specialization and actually involving yourself with those companies is becoming important" - Alagappan Murugappan, CDC Group

JAPANESE LPS AND PRIVATE EQUITY

"We should stop treating PE as a special asset class. It would be more suitable if PE was seen as an investment in the same category as equities, rather than taking the traditional approach of putting it in a separate box. That approach is outdated" - Hidekazu Ishida, Osaka Gas Pension Fund

"For those of us who experienced the Lehman shock and the bursting of the IT bubble, it is a frightening asset. The majority of pension fund managers today know about the Lehman shock but worked in a different department - they did not experience prices plummeting day after day, so they think traditional assets are sufficient" - Yoshisuke Kiguchi, Okayama Metal & Machinery Pension Fund

"If you have a buyout involving an unlisted company, at an appropriate valuation, and a good GP that can spend three to five years providing on-hands support, that is perhaps the most certain way to generate good returns" - Kengo Torii, Denso Pension Fund investment group

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