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Given how sentiment withered as 2018 wore on, it comes as little surprise that 2019 has thus far been characterized by uncertainty. Concerns about the macro climate, high valuations, and unclear paths to exit are primarily to blame. GPs want to be sure their thesis is watertight before pulling the trigger, which means more time spent on due diligence and value creation plans. Our panel of top investors assess the current state of the market.
Asia has become a compelling part of a PE portfolio as more managers back up attractive growth stories with stable track records. For some LPs, the next step is diversification by country, sector and niche. While concerns about a downturn remain, establishing strong partnerships with managers that prevail across cycles is the cornerstone of an institutional approach to the asset class. Our seasoned investors explain the thinking behind their current portfolios and future allocation plans.
Capital has flocked to VC strategies in Asia as LPs look to penetrate a larger portion of the technology value chain, backing start-ups from early stages to maturity. This has enabled incumbent managers to raise larger funds, but the space is becoming increasingly populated as corporates ramp up investment activity and teams spin-out from established VCs. LPs explain how they make sense of the venture opportunity and identify managers that can take advantage of it.
Asia’s secondaries market has stepped up a level in the past couple of years, with a noticeable uptick in activity, greater innovation in transaction structure, and several blue-chip GPs seeking secondary solutions. On the LP side, the strategy remains popular among Asian investors, whether they are looking to build private equity exposure or – to a lesser extent – seeking to rebalance their existing portfolios. Our panelists chart the evolution of the market.
Since the ILPA Private Equity Principles were first published in September 2009, the industry has undergone fundamental changes. The industry has become fully regulated in the US and Europe, and embraced transparency, in particular around costs. At the same time, fund structures have become more varied and complex, and the continuing evolution of GPs and their platforms presents unique challenges to alignment of interests. The latest edition of the Principles, released in June 2019, tackles a number of these changes with aspirational recommendations intended to strike greater balance in GP-LP relationships. Steve Nelson, CEO, ILPA, will share an up-close look at the key ideas and implementation of ILPA’s Principles 3.0 and how these will impact the LP community globally.
Addressing environmental, social and governance concerns within a private equity portfolio requires more than just a boilerplate policy. Institutional investors increasingly want to see detailed annual reporting that sets out ESG objectives on a case-by-case basis, explains approaches to monitoring and measurement, and captures meaningful performance. Our panel of early ESG adopters share their thoughts on moving from box-checking to substance, what it has meant for GP relationships, and the nuances apparent in Asia.
Levels of development vary markedly across Asia’s venture capital markets, but all are to some extent benefiting from growing investor interest – domestic and international, high net worth and institutional – in the asset class. The combination of maturity and the scope to participate at more points along the value chain as start-ups stay under private ownership for longer is encouraging diversification in strategy and skillsets. Investors operating in different markets share their tips for success.
Asian investors have become a mainstay of the alternatives space. Those with more advanced programmes have built up strong in-house skills and become active co-investors, with direct investment the next priority in select areas. For more recent arrivals, the challenge is choosing where and with whom to allocate capital, always conscious of j-curve mitigation. Our panellists explain how their approaches are evolving and what managers must do to win favour from Asia.