The missing link

16 Pages·2012·2.34 MB·English

AVCJ Private equity & Venture Forum 2012 AVCJ Private equity & Venture Forum 2012
europe hong kong
11 october 2012 13 - 16 november 2012
avcjeurope.com avcjforum.com
ASIAN VENTURE CAPITAL JOURNAL
Asia’s Private Equity News Source avcj.com September 18 2012 Volume 25 Number 35
Editor’s ViEwpoint
Optimism over Japan’s
buyout opportunities
returns despite low GDP
PRIVATE EQUITY ASIA
growth
Page 3
nEws
Actis, Affi nity, Bain,
Blackstone, Blue Sky,
Carlyle, CITIC Private
Equity, CVC, CVCI, IndoUS
M&A ASIA Ventures, L Capital,
Longreach, MBK, Motilal
Oswal, PAG, Quay
Partners, RBS, Temasek
Page 4
Fund oF thE wEEk
MGPA announces fi rst
close of $652m Asia real
The missing link
estate fund
Page 14
aVCJ rEsEarCh
Are renminbi fund-of-funds a realistic solution to China’s LP shortage? Page 7 Data f ile Page 15
FoCus dEal oF thE wEEk
Eff ective pitches The fi tness factor
Communication key for Japan’s mid-cap NBC Capital sells Australian health club
Page 11 Page 14
Private Equity & Venture Forum
India 2012
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APOLLO MANAGEMENT
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Managing Director and Chief Managing Director
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Editor’s ViEwpoint
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ASIAN VENTURE CAPITAL JOURNAL
Managing Editor
Buyout firms Tim Burroughs (852) 3411 4909
Senior Editor
Brian McLeod (1) 604 215 1416
PRIVATE EQUITY ASIA
Associate Editor
Susannah Birkwood (852) 3411 4908
Staff Writer
Alvina Yuen (852) 3411 4907
optimistic about
Creative Director
Dicky Tang
M&A ASIA Designers
Catherine Chau, Edith Leung,
Mansfield Hor, Tony Chow
Senior Research Manager
Japan again Helen Lee
Research Manager
Alfred Lam
Research Associates
Kaho Mak, Jason Chong
Circulation Manager
Sally Yip
Circulation Administrator
Prudence Lau
A couple of weeks Ago, I wrote About been driven in part by a greater sense of urgency
Senior Manager, Delegate Sales
the signs of positive change in the Japanese among the big corporations. As for smaller Anil Nathani
private equity industry and that we can be Japanese companies, especially those with an
Senior Marketing Manager
optimistic again about Japan (See page 3 of enterprise value of $500 million to $2 billion, a Stacey Cross
the September 4th edition of AVCJ). This view major selling point would be helping them with Director, Business Development
has more or less been shared by many of our their China strategy, as their ability to expand in Darryl Mag
speakers at our recently concluded AVCJ Private China is going to be critical part of their future. Manager, Business Development
Equity & Venture Forum - Japan, especially those The recent political tension between the two Samuel Lau
in the buyout space. countries over the Diaoyu/Senkaku Islands may Sales Coordinator
Debbie Koo
In the opening keynote panel chaired by dampen the short-term interest.
HarbourVest’s Sebastiaan Van Den Berg, the Credit needs to be given to the private Conference Managers
Jonathon Cohen, Zachary Reff, Sarah Doyle
Japan heads of some of the largest private equity equity firms that are targeting growth segments
Conference Administrator
firms in the world were saying that the scope in an economy that is flat-lining. Bain Capital, Amelie Poon
for private equity buyouts in Japan is widening the most active firm in Japan (in terms of Conference Coordinator
Fiona Keung, Jovial Chung
due to falling public market valuations and clear volume), has recently invested in two such
Publisher & General Manager
opportunities for value-add within portfolio opportunities:Skylark, the restaurant chain it
Allen Lee
companies. bought last year from Nomura Principal Finance
Managing Director
The panel, which comprised of speakers from and Mitsui for $2.1 billion plus debt, and Jupiter
Jonathon Whiteley
Bain, KKR, PAG and TPG, argued that pricing for Shop Channel, Japan’s number one TV shopping
Chairman Emeritus
Japanese companies is much more attractive channel. Dan Schwartz
than it has been historically. It is worth noting According to Shintaro Hori, chairman at Bain
that while US and Chinese companies are trading Capital Japan, the former was attractive because
at similar levels in terms of EBITDA and price-to- of its good price-line strategies that ensure
incisive Media
book, the Nikkei 225 Index is trading 20% lower the restaurant chain caters to most consumer 20th Floor,
at 6x EBITDA. On a relative basis therefore, Japan segments. As for the latter, their core customers, Tower 2, Admiralty Centre
18 Harcourt Road,
is cheap right now. There are more than 800 women aged 40 years and over are spending Admiralty, Hong Kong
companies valued between $150 million and JPY10,000 ($127) a week. With an expanding T. (852) 3411-4900
F. (852) 3411-4999
$700 million, and 60% of them are trading at less population of savings-rich females, the potential E. [email protected]
URL. avcj.com
than 0.8x book value. for growth is almost certainly assured.
More importantly, Japan is one of few markets Finally, as for returns, TPG’s Jun Tsusaka Beijing representative office
Room 1805, Building 10,
where control-oriented buyout deals are possible. dispelled common perceptions of Japan as a low- Jianwai SOHO, 39 East 3rd-Ring Road,
By contrast, in China, Asia’s most active market, return market for private equity. According to Chaoyang District,
Beijing 100 022, China
almost 90% of deals completed last year was for him, TPG’s Japan return of 2.4x is ahead of India T. (86) 10-5869-6205
minority stakes. That number increases to 94% in and Southeast Asia, which both returned 1.8x. F. (86) 10-5869-7461
E. [email protected]
India, while the current hotbed of Southeast Asia So there you go. Buyout firms again are
managed 75%. This obviously means that private maximum bullish on Japan.
The Publisher reserves all rights herein. Reproduction in whole or
equity investors can deliver more value-add in part is permitted only with the written consent of
through operational improvement. AVCJ Group Limited.
ISSN 1817-1648 Copyright © 2012
Speakers also observed that corporate Japan
is more open to the idea of working with private
equity partners, although ensuring alignment Allen Lee
of interests remains a challenge. The changes, Publisher
which have occurred over the last 10 years, have Asian Venture Capital Journal
3
Number 35 | Volume 25 | September 18 2012 | avcj.com
nEws
AsiA PAcific cVc, rBs raise $286m in billion term loan, a $200-300 million bridge-to-
samsonite sell-down bond facility and a $450 million cash bridge.
Affinity launches $3.5b CVC and Royal Bank of Scotland (RBS) have citic Pe backs take-private
pan-Asia fund reportedly sold a combined 153.6 million shares bid for china’s 3sBio
in Hong Kong-listed Samsonite International,
Affinity Equity Partners is reportedly looking to the world’s biggest travel luggage company, CITIC Private Equity is supporting a $331 million
raise up to $3.5 million for a new pan-regional for HK$2.22 billion ($286 million). The deal management buyout offer for NASDAQ-listed
vehicle. The firm – which was founded by former accounted for roughly 10% of the company, with Chinese pharmaceuticals company 3SBio. It is the
UBS Asia chairman KY Tang – has given MVision 65% of the shares sold by CVC and the remaining latest in a string of attempted take-private deals
the mandate as placement agent. The Asia- 35% by RBS. for US-traded Chinese firms that are perceived to
focused private equity firm has already begun be undervalued by the public market.
marketing the fund and has arranged a meeting
with LPs for later this month north AsiA
carlyle offers LPs quick exit
Yahoo Japan launches
route from Asia fund
Vc fund
The Carlyle Group has introduced a liquidity
mechanism for its latest Asia buyout fund that Yahoo Japan has joined the corporate venture
facilitates the exit of LPs that want to sell their capital club by launching a JPY1 billion ($12.8
positions in the vehicle, industry participants tell million) fund.. It will principally target start-ups
AVCJ. The private equity firm has used a similar in the smart phone, internet advertising and
mechanism elsewhere in the world, but this is cloud computing spaces. The VC subsidiary - YJ
the first time it has been deployed in Asia. The shares were purchased by a small number Capital - will be entirely sponsored by Yahoo’s
of global investors through a reverse enquiry. own balance sheet.
PAG announces final close The vendors sold at HK$14.50 per share, which
of $2.4b on Asia fund represents a 3.3% discount to Friday’s closing MBK targets $2.25b for
price. Goldman Sachs was the sole book- fund iii
PAG has announced a final close on its debut runner. CVC bought Samsonite in 2007 for $1.7
private equity fund at $2.4 billion. PAG Asia I is billion, including debt, and funded most of the MBK Partners has launched its third buyout fund
a pan-regional buyout vehicle with a particular transaction with a loan from RBS. with a target of $2.25 billion, AVCJ has been told.
focus on China. It is the largest Asia fund to It is the latest in a string of large-cap pan-regional
achieve a final close since Baring Private Equity funds to enter the market, joining the likes of KKR,
Asia raised $2.46 billion for its fifth vehicle in growing SMEs across sectors such as food, energy TPG Capital, The Carlyle Group and RRJ Capital.
January 2011. and housing. MBK Partners III will follow a similar strategy to its
predecessor.
Actis appoints two new Quay poaches reed from
Global buyout firms see
directors in Asia Pantheon for us
rich pickings in Japan
Actis has appointed two new directors, Danny Australian private equity fund-of-funds and
Koh and Max Lin, who will be based in Singapore advisory firm Quay Partners has hired Jeffrey The scope for private equity buyouts in Japan is
and Beijing, respectively. Koh will be head of deal Reed from Pantheon Ventures, the UK fund- widening due to falling public market valuations
origination for Southeast Asia while Lin will focus of-funds, to help manage its US operations in and clear opportunities for value-add within
on China investments. Koh started his career San Francisco. Reed, a secondary investment portfolio companies, according to panelists at
in the tax division of PricewaterhouseCoopers specialist, joins Ian Deas, also ex-Pantheon, who the AVCJ Japan Forum. “Pricing is much more
(PwC), before moving to its corporate finance has been with Quay Partners since 2010. attractive than it has been historically,” said Jun
and then private equity groups. Tsusaka, partner and managing director at TPG
GreAter chinA Capital Japan.
AustrALAsiA
Longreach nears $400m
Banks invited to finance
final close on second fund
Blue sky makes new
focus Media buyout
executive appointment The Longreach Group is nearing a final close
Banks in Asia are reportedly being approached of around $400 million for its second fund. An
Blue Sky Alternative Investments has hired to provide up to $1.7 billion in financing for the announcement is expected within a month,
Lachlan McMurdo from Bain & Company as private equity-backed management buyout of market sources told AVCJ. The Japan-focused
investment manager of the private equity NASDAQ-listed Focus Media Holding. Citigroup, GP has spent more than two years on the
division. He will be responsible for the company’s Credit Suisse and DBS Bank have assembled a fundraising trail. It held a first close of $135
existing portfolio, as well as covering rapidly package comprising a term loan of up to $1 million in March 2011.
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avcj.com | September 18 2012 | Volume 25 | Number 35
nEws
south AsiA cVci achieves 2x return on biopharmaceutical company that focuses on
chinfon Vietnam exit dermatology, has raised $3.3 million in Series A
financing. The round was led by IndoUS Venture
Blackstone ups financial Citi Venture Capital International (CVCI) has Partners, with Aarin Capital and existing investor
technologies stake to 6% achieved a return of 2x on its exit from Chinfon Navam Capital also participating. Established in
Vietnam, after holding the company for four years. August 2010, Vyome develops treatments for a
The Blackstone Group has increased its “CVCI has spent six to nine months to search variety of medical conditions including fungal
stake in financial services company Financial for an exit until it finally divested the company and bacterial infections.
Technologies India to more than 6% through six months ago to a strategic investor,” a source
open market transactions. Investing via its entity familiar with the transaction told AVCJ. “The exit carlyle, Multiples back
Blackstone GPV Capital Partners Mauritius VI FII, has been the largest exit in Vietnam so far.” south indian Bank
the private equity firm has snapped up an extra Chinfon, which CVCI invested in in 2008,
1.1% stake or 5,24,054 shares in the company. is one of the largest cement manufacturers in The Carlyle Group and Multiples Alternate Asset
Vietnam, with clinker and cement production Management have participated in a qualified
Motilal oswal Pe invests in capacity of 3.2 million tons and 4.2 million tons, institutional placement (QIP) for South Indian
indian realty project respectively. Bank, which raised INR4.4 billion ($80 million)
from eight investors. The bank launched the
Motilal Oswal Private Equity Advisors has teamed allotment program on September 3 and sold
up with two real estate firms - Supreme Universal 200 million shares, or a 15% stake, at a price of
and the Mirchandani Group – to invest INR600 INR22.13 per share.
million ($11 million) in an Indian realty project.
The investment, made via the INR2 billion India carlyle-backed haier offers
Realty Excellence Fund, aims to develop a 16-acre $705m for fisher & Paykel
land parcel located at Somatane, in Pune.
Carlyle-backed Haier Group has put in a NZ$869
L capital Asia in talks to million ($705 million) buyout offer for Fisher &
back Kingdom of Dreams Paykel Appliances (F&P), the New Zealand-based
kitchen and appliance manufacturer. The Chinese
LVMH Group’s private equity investment arm company is willing to pay NZ$1.20 per share in
L Capital is reportedly investing around INR2 cash. Haier New Zealand Investment Holding
billion ($37 million) in The Great India Nautanki Equity, could raise almost $1 billion. Company, a wholly-owned subsidiary of Haier
Company (GINC), which runs the Gurgaon- Group, already owns 20% of F&P.
based Kingdom of Dreams, an entertainment Pe-backed Max india sells
destination designed to play host to live musicals, polypropylene film unit temasek, Bain in race for
Indian culture, heritage, art and cuisine. The two shriram transport stake
parties have already signed a term sheet. Max India, which is backed by Goldman Sachs,
International Financial Corporation (IFC) and Temasek Holdings, Bain Capital and Piramal
creation investments leads Temasek Holdings, has sold its biaxially oriented Group, a conglomerate run by Ajay Piramal,
sonata finance round polypropylene (BOPP) film division to Germany’s are reportedly leading the race to acquire TPG
Treofan for INR5.4 billion ($97 million). The Capital’s 20% stake in Shriram Transport Finance
Sonata Finance, an Indian microfinance divestment allows the Indian company to focus Corp (STFC), one of the leading commercial
institution (MFI), has raised INR350 million ($6.4 on its core healthcare and insurance businesses. vehicle lenders in India. The transaction is
million) in a Series D financing round led by Max India has sold various units over the years. expected to close next month. TPG is said to have
Chicago-based Creation Investments. Promoter been looking to exit STFC since early last year.
Anup Kumar Singh and two existing investors Motilal oswal Pe to set up
in the company - family office the Michael and real estate fund southeAst AsiA
Susan Dell Foundation and local economist
Swaminathan Aiyar – also participated in this Motilal Oswal Private Equity is planning to set
round. up a real estate fund worth up to INR6 billion capstone Partners opens
($108 million). The fund will tap institutional office in Asia
Goldman, temasek to part- investors as well as its traditional LP base of high
exit Bharti infratel via iPo net worth individuals (HNWIs) because new Placement agent Capstone Partners has opened
alternate investment fund guidelines have raised its maiden Asia office in Singapore. Two senior
Goldman Sachs, Temasek and Nomura are among the minimum ticket size for investments to INR10 executives - Alexandre Schmitz and Teena Jilka –
the investors planning to offload part of their million from INR2.5 million. were hired to lead the firm’s operations. Schmitz
shareholdings in the mobile phone tower unit will be the head of Capstone’s operations in
of Bharti Infratel, the Indian telecommunications indous Ventures backs Asia. Prior to the appointment, he served as the
infrastructure firm, which has filed for an IPO. Vyome Biosciences investment director at PAI Partners, and was a
Bharti Infratel, which is also backed by PE players member of the executive committee at Cobepa,
include KKR, India Equity Partners and Axa Private Vyome Biosciences, a Delhi-based and CEO of BeCapital.
5
Number 35 | Volume 25 | September 18 2012 | avcj.com
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CoVEr story
[email protected]
China’s FOF experiment
China has started to witness the emergence of renminbi-denominated fund-of-funds, but only a few
institutional and individual investors appreciate their investment philosophy
MAgIc stone AlternAtIve InvestMent term investment philosophy of such products. denominated fund-of-funds had reached a total
is one of the first investment firms in China “Raising renminbi has been a challenge so value of RMB3.3billion.
to experiment in the renminbi fund-of-funds far in China, but we do see the need to develop According to market sources, the US-listed
market. However, getting things right in China’s our industry with other players,” Jenny Zeng, company first began its private equity business
nascent private equity market is never an easy managing partner of Magic Stone, tells AVCJ. by setting up centers in each city to cold-call
task. “Building up a fund-of-funds takes you years of individuals with bank balances above a certain
Given its management profile, Magic Stone experience and any new players which come level, in a move to match prospective investors
- led by a team of Chinese PE veterans including without preparation and patience are not going with GPs. The business model has proved itself as
former founding partner of Jade Invest Jenny to be very successful.” very profitable in the last few years, with another
Zeng and ex-president of China Venture Capital 6,000-8,000 copy-cat operations having been set
and Private Equity Association Frances Huang Nascent market up in Shanghai and Beijing.
- has tried to approach the local fund-of-funds The renminbi fund-of-funds market first started “People were invited to events where GPs
space with institutional practices, unlike many to emerge to any great extent in late 2009, when could introduce their funds. After that you had
of its local counterparts. It has established a China witnessed ample liquidity and investors to sign a document,” a pan-Asian LP who joined
database that houses information from more were impressed by the high returns generated one of these matching events recalls. “Because of
than 1,000 GPs, it follows precise due diligence from private equity investments. At that time, a the lack of channels to LPs, these intermediaries
and investment processes, and organizes tailor- large number of intermediaries – some of which – who have developed a large network of HNWIs
made roundtables to bring together institutional called themselves fund-of-funds – were set – have the bargaining power to charge up to 3%
investors and high net worth individuals (HNWIs) up with the primary motive of pairing up rich up front and half of the carried interest from GPs.
and entrepreneurs, to talk about the changing individuals with the large number of GPs that No one has ever done that.”
dynamics in the industry. were flocking into the market. While local structures doe serve as a bridge
Its international approach, however, has not Noah Holdings has been a classical example. between retail investors and GPs that are thirsty
borne fruit just yet. The private equity player Founded in 2005, the New York-listed company for capital, most of them focus on screening the
launched its maiden renminbi-denominated
fund-of-funds in January 2009 with a target of
China's fundraising breakdown by value
RMB1 billion ($158 million). The vehicle – which
is yet to count institutional investors as its LPs
1%
– is still on the fundraising trail after more than 2%
three years, according to a source close with the
5% 9% 12%
situation.
Buyout Fund
It goes without saying that Magic Stone – 8%
32% Fund of Funds
which also manages US dollar fund-of-funds 24% 2%
Jan-Aug Infrastructure Fund Jan-Aug
- is not the only recent player to attempt the 2011 42% PE Fund 2012
renminbi market. According to AVCJ Research,
Special Situation Fund
among the 80 disclosed renminbi fund-of- VC Fund
18% 45%
funds in China, over half of them were raised
between 2009 and 2011. However, out of
the top 10 vehicles by value, nine of them are
government-backed, with the remaining one – Source: AVCJ Research
Noah’s Jingzhao Fund – entirely raised private
placements by HNWIs.
There is no doubt that a maturing renminbi distributes fixed income products and private most popular funds without an institutionalized
fund-of-funds market will play a positive role equity funds that are originated in China. Its due diligence system. Although some of these
in introducing Chinese investors to a more financial services also involve fundraising for GPs, so-called fund-of-funds have generated good
institutionalized investment approach, but including the likes of CDH Investments, Sequoia returns from China’s previous private equity
a number of private equity players question Capital and SAIF Partners. When these funds frenzy, it is questionable whether they will
whether this is a realistic goal in short term, were oversubscribed, Noah was said to channel be sustainable when clients become more
given that fund-of-funds in China are still largely the extra capital into starting a fund-of-funds sophisticated.
constrained by institutional and individual business. In February, Jingbo Wang, founder of In addition, given that IPO exit multiples
investors too immature to appreciate the long- Noah, told AVCJ that the company’s renminbi- have fallen sharply in domestic bourses in recent
7
Number 35 | Volume 25 | September 18 2012 | avcj.com
CoVEr story
[email protected]
Top 10 Renminbi-denominated fund-of-funds vehicles.
Shanghai Venture Capital is a case in point.
target current The venture capital management company –
fund launch size size state-
which was founded in 1999 – now manages
fundname status date ($mln) ($mln) backed?
RMB600 million for the Shanghai government. In
Guochuang Kaiyuan Private Equity Fund (CDB Second Dec-10 6000 1416 Yes
2006, Shanghai Pudong Science and Technology
Capital) Closed
Investment (PDSTI), another state-backed
Jingzhao Fund (Noah Holdings) Final Closed Apr-10 732 787 No
manager, also closed its first fund-of-funds
Zhongguancun Venture Capital Introduced Fund Final Closed Nov-05 604 787 Yes
at RMB1 billion. The private equity manager
Beijing Private Equity Investment & First Closed Sep-09 1465 315 Yes
subsequently closed two more similar funds in
Development Fund
2009 and 2012 for Anhui and Hubei, respectively.
Tianjin Binhai New Area Venture Capital Final Closed Jul-07 262 315 Yes
Diction Ying, managing director of investment
Introduced Fund
management at PDSTI, tells AVCJ that their
Hunan Venture Investment Guidence Fund Final Closed Dec-10 150 157 Yes
funds were launched to serve two underlying
Shanghai Pudong New Area Venture Capital Final Closed Apr-06 125 157 Yes
objectives: first, fund-of-funds may achieve better
Fund-of-Funds (Pudong Incubation Fund)
financial efficiency when compared with direct
Suzhou Industrial Park Venture Capital Guidance Final Closed May-06 125 157 Yes
Fund (Suzhou Ventures Group) investments done by the government; second,
investing into GPs will enhance the overall
Venture Capital Guiding Fund of Shanghai Final Closed Jan-10 439 157 Yes
(Shanghai Venture Capital) development of private equity and venture
Source: AVCJ Research capital within the region.
“Given that every single dollar of our fund
months, the more challenging fundraising China Life and China Insurance are all said to is channeled through our balance sheet, we
environment may be an indication that investors have hired consultants to provide private equity are not a real fund-of-funds from a fundraising
wanting speedy returns have now lost their advice instead of outsourcing their investment angle,” says Ying. “However, with the lack of
appetite for the asset class. “There is no more activity. Small insurance companies – which clear regulations, participation from mature
money from these LPs compared to a year have not been able to develop their own fund institutions - rather than individuals - is more
ago and they don’t want to maintain their management teams – will be potential investors appropriate for the development of the whole
commitments,” says Ludvig Nilsson, managing for local fund-of-funds, but none of them have fund-of-funds industry.”
director of Jade Invest. “So a lot of renminbi LPs put their thoughts into action so far. While the rationale for the existence of these
are selling their stakes and there is currently a big In addition, given the fact that most guidance funds is largely driven by government
mess.” private equity and venture capital funds in incentives to promote private equity and attract
China are not specialized funds, fund-of-funds people to set up shops in their specific regions,
Immature LP Base do not necessarily serve a diversification it is not surprising that they often work with
As HNWIs fail to guarantee long-term capital purpose, considering there is an extra layer of a different mandate, with less emphasis on
sources for local currency funds, PE players management fees compared to directly investing financial returns. Jade Invest, for example, was
eyes on the few institutional investors that may into GPs. According to a source close to the China approached but did not end up going to any of
have the potential to deploy a large amount of Insurance Regulatory Commission (CIRC), while these partnerships as it doesn’t see the alignment
renminbi capital in the private equity sector. insurers do not see local fund-of-funds being too of interests.
In one corner, the National Social Security different from what they have internally, none of
Fund (NSSF) is allowed to deploy as much as them has even remotely considered investing in A learning process
RMB90 billion to the asset class; in the other, the such vehicles. Although many of the guidance funds do not
top 10 insurance companies - under the current “The key problem is that no one in the consider financial numbers as their primary
regulatory system - also have a potential private market is willing to pay for manager selection. objective, they also have to achieve reasonable
equity allocation of more than RMB250 billion, Understandably, it is difficult to appreciate the returns in order to defend the feasibility of
James Zheng, managing director of Fosun Capital value of manager selection until you have seen establishing a private equity industry in their
Group, claims, citing official figures. low or negative returns from brand name funds regions. As a result, some guidance funds have
“If we apply the global average - which is that and deals,” says Jade Invest’s Nilsson. “Local started to hire talented individuals from the
fund-of-funds account for roughly 10% of total institutions don’t want to pay because they market, in a move to transform themselves
private equity commitments - an existing RMB34 can set up their own teams, neither do HNWIs into commercial-driven entities that can make
billion can be channeled from the NSSF and local because they just appreciate the placement meaningful investments.
insurers, not to mention large conglomerates and solutions, which provide them discounts to some Suzhou Ventures has been the most
HNWIs,” Zheng adds. “Yet, most of the Chinese famous GPs.” successful case so far. In 2006, it launched a RMB1
investors want to do private equity investments billion fund-of-funds, Suzhou Industrial Park
by themselves as they believe they can make Government guidance funds Venture Capital Guidance Fund, alongside China
money faster than hiring a manager.” Given the limited LP base, a recent trend is Development Bank (CDB). Four years later, the
For example, the NSSF is already large and that private equity players have entered into pair launched another fund-of-funds targeting
sophisticated enough to invest into private partnerships with local governments and state- RMB20 billion to invest in venture capital funds
equity and venture capital funds through its owned entities to form guidance funds, which with an investment range between RMB200
in-house fund management professionals. work similarly to fund-of-funds in that they invest million and RMB1.5 billion. The fund is expected
Insurance companies such as Ping An Insurance, in various private equity and venture capital to close at the end of 2012.
8
avcj.com | September 18 2012 | Volume 25 | Number 35
CoVEr story
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“It’s true that we started off being a guidance of-funds in the long run because it is a market Rebecca Xu, co-founder and managing director
fund, but we have gone through restructuring that you don’t want to miss,” says Judy Qing Ye, of Asia Alternatives. “I would not be surprised
processes to become a market-driven entity. managing partner of Yi Mei Capital. “Unless you if any of these players became a real fund-of-
Now we are open to various investment regions manage renminb, you can’t understand the funds, given that investors will eventually need
and stages,” Jipeng Wang, partner of Suzhou depth of the market. You can never evaluate the professional fund management services when
Ventures Group, tells AVCJ, adding that the market by just taking a Western point of view.” they are overwhelmed by the market complexity
company’s LP base will consist of institutional Globally, mature fund-of-funds markets are as time goes by.”
investors, fi nancial investors and big private often driven by two kinds of demand. First, small Foreign players, which have institutional
companies in the future. institutional and individual investors – who do platforms and long-term experience, may also
While Suzhou Ventures has been the fi rst not have the expertise in fund management – help educate the market. At the moment, there
case that has gradually taken a market-driven rely on fund managers who have the professional are plenty international fund-of-funds already
approach and attracted the continuous support knowledge and skills to aggregate their capital working in the country, although they are using
of CDB, more similar cases are expected to and get access to top-tier GPs. Second, large US dollars and investing in off shore funds. Based
emerge as time goes by. Given that guidance institutional investors hire fund-of-funds to on the most recent defi nition from the National
funds are currently the only local groups which access small-cap or specialized funds in areas in Development and Reform Commission (NDRC),
have experience betting on a sizable number which they don’t have in-house expertise. any money managed by foreign GPs is still
of funds, they would be in the best position to Similarly, once the LP base in China develops defi ned as foreign capital. As a result, GPs may
become the next wave of fund-of-funds in China. to a stage at which it can embrace diff erent have to rely on local fund-of-funds, if any, to
Some overseas players also recognize the types of demand, it will be time for renminbi enjoy domestic treatment.
opportunity to test the water through an fund-of-funds to become a meaningful part “The race between fund-of-funds players will
initial partnership with local governments. of the private equity supply chain. It’s possible be determined by whether pure local fund-of-
EMAlternatives, through its China affi liate YiMei that Intermediaries - which have developed funds can develop institutionalized practices and
Capital Management, launched a local currency a good client-base and start to adopt a more a track record before the market opens up to
separate account with the MinHang district of international approach – will emerge as another allow groups like us to do renminbi fundraising,”
Shanghai Municipal Government to invest in impetus for the fund-of-funds market, though says Vincent Huang, partner at Pantheon
venture capital and private equity funds across not immediately. Ventures. “The entry barrier is still very high for
the country. The local government has so far “Some of the intermediaries have been able renminbi fund-of-funds targeting institutional
invested RMB500 million. to bring their clients good quality renminbi GPs LPs. For any group that meets the hurdle, there is
“It’s the right move to develop renminbi fund- based on their own due diligence work” says very little competition and the market is huge.”
Asia has over US$318 billion in private
equity funds under management
8th annual edition 88th annual edition ASIAN VE NTURE CAPITAL JOURNAL 77th annual edition ASIAN VE NTURE CAPITAL JOURNAL
ASIAN VE NTURE CAPITAL JOURNAL AAVVCCJJ pprriivvaattee eeqquuiittyy aanndd PRIVATE EQUITY ASIA AAVVCCJJ pprriivvaattee eeqquuiittyy aanndd PRIVATE EQUITY ASIA
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AVCJ private equity and PRIVATE EQUITY ASIA AAuussttrraallaassiiaa India
venture capital report M&A AS IA 2012 2012 Just where and how are these funds
distributed? Read all about it in AVCJ Private
China Equity and Venture Capital Report, the annual
series of regional reports by the leading
2012 source of information on Asian private
equity, venture capital and M&A.
Reviewing the year’s activity in the
industry, the regional reports are filled
with up-to-date data and intelligence
88th annual edition 77th annual edition on fundraising, investments, exits and
ASIAN VE NTURE CAPITAL JOURNAL ASIAN VE NTURE CAPITAL JOURNAL
AAVVCCJJ pprriivvaattee eeqquuiittyy aanndd PRIVATE EQUITY ASIA AAVVCCJJ pprriivvaattee eeqquuiittyy aanndd PRIVATE EQUITY ASIA M&A. They also feature information
vNveennttouurreer cctaahppiitt aaAll rreeppsooirratt M&A AS IA vSvSeennoottuuuurree ttccaahhppiitteeaall aarreessppoottrrtt AAssiiaaM&A AS IA on key companies and transactions.
Offering global perspective alongside
2012 2012
local opportunities, the regional reports
include Australasia, China, India, North
Asia, and Southeast Asia.
For more information or to order, call
Sally Yip at +(852) 3411 4921 or email
[email protected].
* as of September 30, 2011. Source: AVCJ avcj.com
Private Equity & Venture Forum
Europe 2012
11 October 2012, No.4 Hamilton Place, London
GLOBAL PERSPECTIVE, LOCAL OPPORTUNITY avcjeurope.com
Asia Calling: Finding growth in a global landscape of volatility
Distinguished global speakers include:
Joseph Y. Bae Roy Kuan
Managing Partner Managing Partner
KKR ASIA CVC CAPITAL PARTNERS
Simon Pillar Mukund Rajan
Managing Director Managing Partner
PACIFIC EQUITY PARTNERS TATA OPPORTUNITIES FUND
For the latest programme and full list of speakers, visit avcjeurope.com.
Attending Limited Partners include:
AlpInvest Partners IFM Paul Capital
Belmont Global Advisors (UK) Ltd Industriens Pension QWin Capital
British Steel Pension Fund MetLife Investments Limited Squadron Capital
Capital Dynamics Northleaf Capital TfL Pension Fund
Coller Capital OPTrust Private Markets Group Wega support GmbH
Contact us
Registration: Anil Nathani Sponsorship: Darryl Mag
T: [phone] E: [email protected] T: [phone] E: [email protected]
Lead Sponsor Co-Sponsor
Capital Partners
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