The expanding LP universe

The annual AVCJ Forum in Hong Kong is a helpful reminder of the diversity of the investor community and what this means in terms of how different LPs access the asset class.

The principal driving force behind AVCJ's creation 26 years ago - the first conference came less than 12 months after the first edition of the journal - was to communicate with LPs. "We needed a voice for the industry so we could all raise money and find out what everyone was doing," Lewis Rutherfurd of Inter-Asia Venture Management told AVCJ last year.

Within five years the AVCJ Forum was drawing in more than 200 delegates.

The 26th incarnation of the event was attended by nearly 1,000 people with somewhere in the region of 300 LPs signing up. The audience may be larger and generally better informed than in 1987 but a few of the themes remain constant: where deals are coming from, how they are structured, the impact of legal and regulatory considerations on origination and negotiation. Different drivers, same clutch points.

What has changed hugely is the geographical origin of the LPs - 26 countries and territories were represented in 2013. This is based on where LPs were traveling from, not the jurisdiction whose investors they represent; an important consideration when you compare this year's numbers with those from just two years ago.

Hong Kong, China and Singapore accounted for a large portion of the LPs, and their share of the total has crept up a few percentage points since 2011. This is not just a reflection of the growing significance of certain local investors - sovereign wealth funds come to mind - but also the fact that more international LPs are establishing or augmenting their on-the-ground presence in the region.

There have been significant jumps, albeit from relatively lower bases, in Australian, Korean and Middle East representation. In Australia, LPs are now looking to diversify their PE holdings by allocating more to overseas managers; in the Middle East, a number of sizeable sovereign investors are building out youthful private equity programs; Korea, meanwhile, could be said to have elements of both these trends.

The US always has been and will remain a sizeable source of LP delegates, but a host of other jurisdictions - from Brazil to Finland - are participating more widely than in previous years.

During the LP Summit, Nicole Musicco, who is responsible for the externally managed PE and VC fund positions in the Ontario Teachers' Pension Plan portfolio, offered insights into how a large and well-resourced investor approaches the asset class. However, other snippets from panels and conversations on the sidelines illustrated how strategies vary.

These included: the endowment that identifies attractive segments in Asia, meets with a few relevant managers and then picks the preferred one, recognizing it doesn't have the time or resources to cover the entire GP universe; the European insurer with one GP relationship in the region - a mid-cap manager that came onto its radar almost by chance - and no burning desire for rapid expansion; and the sovereign wealth fund that, when asked if it backed small managers as well as big, simply said, "fund-of-funds."

The AVCJ Forum remains a platform for these GPs and LPs to find out what one another wants and who is best placed to deliver it. But compared to 26 years ago, there are many more questions and answers.

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• Topics
• LPs
• Fundraising
• LPs
• Fundraising
• Asia
• AVCJ Events