Private equity expert: four tips for investing in Asia

By Ishika Mookerjee for City Wire Asia 

Asia is seeing increasing interest for private equity investments, according to Udit Gambhir, managing director – Cim Global Business Singapore.

Speaking to Citywire Asia, Gambhir said: ‘People are realising that Asia is not as scary as they thought it would be. Yes, it is an emerging region and has its quirks but it also holds a lot of opportunities.

‘A sizeable percentage of the deals done in Asia are in the tech space, be they IT, app or delivery service related. There is also a lot of focus on clean energy and environmental sciences aside from the usual healthcare investments.’

However, as attractive as the returns may be, investors need to consider a few things before committing their money to private equity in Asia, the expert said.

1. Go direct

Direct investments, where the investor acquires a controlling stake or a majority stake in an investment directly, are in fashion; usually large sovereign funds or limited partners (LP) with deep pockets do this, says Gambhir.

‘LPs investing in funds are increasingly questioning the need to pay fees.

‘Since they have the in-house expertise, they are reconsidering the need to pay into the 2-20 model or carried interest to general partners (GP) and are looking at direct investments instead,’ he said.

GPs are also considering co-investments with LPs when they want to identify a good deal and they know LPs who have been exposed to that sector/industry, he noted.

‘People also want local LPs because they know the lay of the land,’ he added.

2. Background checks

Do a fair bit of research on general partners before investing with them, Gambhir said.

‘It’s important to look at the deal and see what they have done in the past. Credentials are very important.’

He advises investors to speak to LPs who have worked on deals with the GPs in the past.

‘Going cross border, for example, is not that easy. We are living in Asia where every market has its own nuances and is restricted. What works in one market might not work in the other, so don't take that as a sure shot expansion strategy for one of the investment,’ he said.

3. Infra and India

‘Infrastructure will be huge in the PE space in the coming years,’ said the Singapore-based expert.

‘Going forward, infrastructure, clean energy and technology will drive PE deals in Asia.’

India, Indonesia and the Philippines will be the drivers for Asia going forward, according to Gambhir.

‘There’s a lot of value in India especially. I see a lot of people being bullish on that in the long term.’

4.Take a macro view

Capital raising has understandably been a concern this year, Gambhir noted.
‘It all adds up – the China slowdown, large amount of Asia-focused capital raised last year that hasn’t been deployed yet and the inability to carry out exits due to market turmoil.

‘But on the flipside, the slowdown in China means there is a lot of capital available in China that can be deployed outside. So people can get returns from that as well,’ he said.

‘So take a macro and long term view.’