Haves and have nots

Sadly, for the latter group, the case hasn't changed but on a global basis - and seen in a few examples here in Asia - the haves are more than making up for the deficit as LPs look to invest in those with good track records. While not covered in AVCJ's first quarter numbers, a primary example of a "haves" would be tech-focused Silver Lake Partners, which recently closed its fourth s definitely a "have." 

Besides its track record, there are a three of points worth noting fund at US$10.3 billion after just 13 months in the market. With a reported lifetime track record of 27% gross IRR, Silver Lake i
about Silver Lake that contributed to the firm's successful fundraising and may indeed become issues - either positive or negative - for other firms in the not too distant future.

First, Silver Lake clearly addressed succession planning. Only one of the three founders - Jim Davison - is listed as a managing partner of the new fund. The other four, including Asia head Ken Hao and Dell lead Egon Durban, were all promoted to this level in 2011.

Second, while all the 10 largest investors in Silver Lake's previous fund re-upped, the new vehicle shows the growing influence of Asian LPs with over half the capital coming from non-US institutions. The private equity firm's management were also big contributors, putting in $300 million from the GP and connected entities. LPs like it when GPs put their money where their mouth is.

Third, just like a number of its industry peers, Silver Lake has reportedly reduced fees for its bigger LPs. Management fees started at 1.5% for investments of less than $250 million but drop to as low as 1.375% for those that committed at least $500 million. Carried interest remains at 20%.

These issues are relevant to many Asia-focused funds currently on the road. And they must do everything possible to impress prospective investors if they are to weather the current storm. A total of 33 funds raised $6.8 billion in the first quarter of 2013, down substantially from the $12.8 billion and $15.1 billion raised in the same quarters of 2012 and 2011.

Regional buyout firm Affinity Equity Partners and China specialist CDH Investments led the way, with first closes of $1.5 billion and $1 billion, respectively. As a result, the large-cap funds share of the overall first quarter total jumped to 14.3%, compared to 9.1% in the first quarter of 2012 and 5.1% in the first quarter of 2011.

Growth capital funds - targeting less than $100 million - inevitably saw the sharpest decline in market share (39.2%, down from 52% in the first quarter of 2012 and 57.3% in the first quarter of 2011). This is a byproduct of the weak IPO markets, particularly in China where many small-cap managers only got into the business with a view to flipping a few companies into listings.

Let's try to end on a positive note. While there continue to be headwinds affecting private equity in the region, history tells us that Asia takes time to get going due to the Christmas and New Year holidays and then the Lunar New Year break. Here's hoping I return with stronger numbers in three months time.

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• Topics
• Fundraising
• Buyout
• Greater China
• Silver Lake
• Asia
• Fundraising
• buyout
• Affinity Equity Partners
• China