Private Equity – Asia Pacific
German Pension Fund | 2020 - 2021
Engagement at a glance
A German pension fund was seeking to complement an existing private equity allocation in Asia Pacific (APAC) by dedicating EUR50 million to a new mandate. The client was seeking to invest in a pooled direct fund and had a targeted internal rate of return (IRR) of 10% net.
The investor was interested in diversifying its existing exposures to APAC private equity, which were primarily focused on developed economies, and keen to explore the possibilities of focusing more closely on regional emerging markets, including China’s, without overweighting it in the context of its existing portfolio. The client was also closely focused on identifying managers that could demonstrate strong ESG capabilities.
- Mapping the manager universe: prior to launching the search, bfinance helped the investor understand the landscape of private equity funds in emerging Asia, looking specifically at the decision to deploy capital to single country funds vs. regional funds. Many of the pan-Asia strategies available were quite broad, but—while most of the funds were generally tilted towards China—the evident diversity was enough to reassure the client that a healthy range of potential regional strategies would be available. The results of that research study solidified the client’s interest in taking a regional approach.
- Understanding ‘fit’ with the existing portfolio: Analysis of how the proposed solutions would integrate with the investor’s existing Asia Pacific private equity exposures was an ongoing feature at every stage of the process—from initial assessment of managers’ proposals to final combination analysis of the selected managers after due diligence.
- Facilitating knowledge transfer: From the outset, the client wanted to participate in meetings with prospective managers to gain insight about the investment opportunities and challenges that they encountered on the ground in local markets.
- Gaining additive exposures: the search allowed the client to complement its existing Asia Pacific allocation to developed markets by adding two differentiated emerging market strategies: a mature pan-Asia strategy with a global platform focused heavily on China and India and a smaller Southeast Asia boutique growth manager.
Our specialist says
Finding managers in Asia Pacific that could demonstrate strong ESG capabilities was a key focus area for this investor, and we worked closely with the team to incorporate its approach. Among other considerations, the client placed particular emphasis on understanding the external collective industry initiatives each manager subscribed to, either formally or informally, such as the United Nations’ Principles for Responsible Investment. This analysis allowed us to clearly compare and contrast how the different groups demonstrated real commitment to ESG—on a global basis, but most importantly for this search, within Asia.