Asia PE

Hi guys, I'm more than a few years out of college (let's say I'm 30 years old) and work in Hong Kong in private equity. Before anyone starts asking any questions, let me be very clear that I do not work for a PE house or make investments. I work for a consultant/advisory firm.

A bit about me. American born, raised and educated to Asian parents, so I'm first gen, speak two Asian languages (at various levels) and have been doing this for over five years now, based in Hong Kong, covering Asia private equity (includes VC, Credit and some funky strategies as well).

What do we do? Essentially the big institutions and other investors (Sovereign Wealth Funds, Public and Private Pensions, Endowments, Private Banks, Family Offices, etc) all pay us a fee to tell them which funds to invest in, or which geographies, or how to weight portfolios. It's sort of outsourced fund due diligence. An even easier comparison is that it's Private Equity Fund of Funds but without actually investing.

This means that I (and my colleagues) essentially get to see tons of data and meet tons of people in the industry, since we have to evaluate funds, we meet Partners/MDs and their IR staff, who pitch the funds and provide data, placement agents (who raise capital for funds and take a cut, like regular investment banking), other investors, Fund of Funds etc.

How can I help? Well since I've been out of school for about 8 years now, I'm happy to answer career questions (where I've stumbled, made mistakes in interviews, how tough it is to change careers - which I know very well personally), culture in specific shops, how good shops are performing, how shops are set up, what people look for in candidates (I don't know as much about interviews for PE funds since I've never done one - have only heard about them) etc etc etc.

I'll start with some hints. Most funds in this region generally suck and have not performed too well. It's a lot of public market beta and a ton of shops are very very heavily key man driven and tons of very mediocre people (I guess like in any profession). Just something to keep in mind if an interviewer is giving you a tough time...

Please ask away. All I can promise is that I will do my best to be honest and frank in my answers.

 
Best Response

Responses to questions in order...

  1. Define "good"? Many people define that "good" as having raised money successfully, ie. capital stability. Others by returns. There aren't really too many funds that can be called "good" courtesy of their returns since SEA is still a pretty new market and track records like anywhere take time to build. Interesting firms, I would say, include, Southern Capital, Saratoga Capital and Northstar. Capsquare is doing interesting things but its untested. Note that 3 of 4 are Indonesia-focused.. Creador is interesting, they do a mix of publics and privates. Navis is a big brand name but returns have been pretty disappointing but investors keep giving them money...

  2. Depends on what kind of role you want. Still more finance-heavy since many places value IBD/modelling skills more. But that being said I've seen some shops (though more in China/India) take accountants/auditors or folks from like KPMG to help with some of the forensic stuff as analysts/associates. A number of shops do like operating backgrounds, however, especially if they are more sector focused. By and large in Asia, its a lot of minority investing.

  3. Ideal background? I think more and more people want locals (SEA is still behind places like China/Japan/Korea/India in this regard). So, like Malaysian, Indonesian etc, went to good school/business school, went to a bank for a little bit or management consulting etc. It always helps if you are rich/connected, which enough people are, to help with sourcing. Also don't be afraid to cold call some of the smaller shops and ask for internships, they might do it... Exit opps? Uhm.. Move to another PE firm at a higher position, maybe a hedge fund, move to a corporate... Promotions beyond a certain level are hard since so much business is personal in this part of the world (family/government connections etc).

Actually on that last point that's a warning for everyone who wants to do Asian PE. Lots of people outside the bigger shops don't really have a chance of getting promoted because they just don't have the family background or whatever. Heck its even true at some big shops. In that way this part of the world does not have the meritocracy that other markets do.

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

thanks for doing this. i think there are a lot of resources about working at a PE firm in terms of responsibilities, compensation, career path etc. however the LP side of PE is often misunderstood and i hope get some info there. how do you see compensation/lifestyle/career progression differ for different LPs such as consultants/advisors, FoF, swfs, family offices? let's also add in the mix placement agents.

 

You didn't say what levels of fluency your two languages were at but assuming you're not a native speaker, how much of a disadvantage did you have due to language? Curious as an American born Asian that's conversational but not completely fluent.

 

I'll start with the latter comment first since its more simple. I'm of South Asian descent, and speak my parents native language pretty fluently, but can't read or write. Not that I have to since most law/deals etc in India and South Asia are in English and there are so many main languages in South Asia (India has 20 some official languages) and the common one is English. I also speak Mandarin Chinese, to some extent. I can get my point across, have conversation, understand management presentations to an extent and ask the important questions. "Semi-proficient?" "moderately proficient?" beats me.

When I joined my firm, they had just started a PE arm and needed someone, they saw that I spoke two Asian Languages, had lived in China, was American, went to a target school and took a shot on me saying that I could pretty much cover the region. In the LP/FOF world its not as important since most stuff is given to you in English and most people speak it, though language helps on specific DD (ie. talking to company management so they don't BS you or they feel more comfortable). However, this is changing fast since more places want to be seen as "locals" now and lots of bankers/pe types are quitting due to hours/not able to get promoted/etc and want to join the LP side for the better balance of life. Those folks have local language skills and then you have the consultant (Bain etc) who make the move over as well that have local language skills...

I think my profile would have been great in the late 90s to early 2000s when this was still a nascent market, but no longer. Most banks/pe funds wouldn't hire me for those skills now; it would just be a starting point, an interesting story, something to demonstrate my capabilities or drive or whatever mumbo jumbo they want to call it. They want local people. Even if one does make it over here without language skills he/she will probably cover small markets and moving up would be hard. The high level folks with no language skills either have sector expertise or have made it to be senior in a big place NYC/LON etc and have moved over to be more high level/flag carrier etc.

JAZ - a very interesting question indeed. In a lot of ways this is still a new market. Most LPs are SWFs, FoFs, private banks, family offices and the odd insurance company/pension. Not as diversified as the US, especially the best. FOF's have is tough since the market overall in Asia PE has been volatile, has not returned much cash in recent years and they were charging 1/10 on top of the 2/20. Not much of a value proposition. So they've had to cut fees and struggled in fundraising. As a result of lower AUM it means comp will be flat or lower and those high up won't move (ie clear space out for younger people). Tough. Comp varies widely as do hours. Some people work almost banking hours to justify "value add (ie making up macro slides or answering lame questions) while others have a great balance. SWFs I don't know except that they are more opaque, not the best payers (Temasek and GIC are different) and getting promoted can happen since they are such big institutions. However tough to make it to the top unless you are very majorly politically connected I think. Others are more biased towards nationality (ie. CIC, KIC etc).

Family offices vary as well. I think promotion there is tough since a fair few times the family will have a kid who went to a top school, then worked at GS/MS or whatever and goes back to manage the family money. Work level varies there are well. These folks are pretty secretive. Consultants. Generally almost like FoF sort of work and hours. Pay a fair bit worse since fees are lower or whatever and you're often advising not actually investing. Placement agents can make a lot of money. Asia is tough since a lot of the great mandates are taken so then it becomes a price game of who can offer the lowest fee (just like anything else, like investment banking, right?). In the end placement agents are just like bankers. They are raising capital and taking a fee, the product they are raising for is different, that's all. Good shops are pretty few in number and it can be a real struggle for them to get a good mandate (ie. pitch for it, negotiate, get it, raise the money, be involved in the allocation, get paid, and repeat). These people work a lot and are always on planes. Work itself can be mindnumbing powerpoint stuff and babysitting (literally) and doing road shows. There are two roles. Origination/project management (that's like meeting funds, evaluating them, doing DD, then filling out paperwork and information requests once the mandate has been taken), distribution is sales. Will also meet GP, may help with DD, but mostly touching base with LPs, mapping out market, and selling the fund to LPs, flying around on roadshowes, setting up meetings, calls etc.

Then you have the insurance companies/pensions which I don't know much about, aside from the Canadians, OTPP and CCPIB. OTPP I think pays below market, but hours seem to be ok. The do both funds and co-invest. CPPIB is a machine. They have hired tons of senior people from funds/banks etc and in addition to doing funds and co-invest, they often also look for their own deals. I think they get paid pretty well, but they also work banker hours, which is a mystery to me for anyone working at a pension. It could be a function of their bosses.

I hope this helps. Apologies for the length.

I used to do Asia-Pacific PE (kind of like FoF). Now I do something else but happy to try and answer questions on that stuff.
 

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