Transparency key in Asia

Finding the right secondaries deal in Asia isn't easy, but transparency can help ease the process, especially when it comes to GP restructurings, DeAWM head of Asia secondaries Jason Sambanju explains.

Secondaries investors may be bullish on Asia but it’s still challenging to find the right deals, particularly in emerging economies like China and India.

“The Asian secondaries market continues to grow [and] we do see dealflow in the region picking up – it is just a matter of being able to pick and choose the right deals,” said Jason Sambanju, head of Asia secondaries at Deutsche Asset & Wealth Management.

Sambanju explained one of the key challenges is transparency: “particularly when you are looking at a GP or fund restructuring deal where [there is] a smaller group of assets – so 10 to 20, rather than 100 if you were looking at a broad LP package. Then you really want to make sure you get your diligence right”.

Moreover, in heavily regulated markets like China and India, foreign ownership restrictions can impede dealflow. This needs to be considered very carefully when identifying good opportunities.

“You want to make sure you have as much control offshore in terms of your being an investor in the asset and you need to really have an understanding of how these sorts of structural nuances work,” he added.

When less experienced investors play in Asian markets, that can also complicate the process. While the limited partner base of Asian funds tends to be similar to those in Europe, some countries, notably India, have local investors to contend with – and this changes the dynamics of the secondaries market.

“In India, you have domestic investors [like] Indian banks, insurance companies or high net worths and these are LPs that don’t have as much experience dealing with private equity funds as the US pensions or European corporates or pensions.”

When approaching a fund and its LPs, there is a required education process, Sambanju added. LPs need to understand the intent of the restructuring and what they can gain from it.

A version of this story originally appeared in the September issue of Private Equity International.