NewQuest: Asia is not for the faint-hearted

Hong Kong's NewQuest Capital Partners was the only firm based outside the US or Europe to make our Si30 ranking of  top fundraisers. The direct secondaries firm has raised $1.3bn since 2011 and beat firms including investment bank JPMorgan and global investors StepStone to come 26th. Secondaries Investor caught up with managing partner Darren Massara about the fundraising environment in Asia and competition for deals.

You recently beat the hard-cap on Fund III. Is there strong demand from LPs for Asia-Pacific secondaries?

Darren Massara
Darren Massara

The Asian secondaries market is still at a nascent stage. While we are several years behind the US and Europe in terms of overall development, the market offers an attractive opportunity for secondaries players who understand how to operate in Asia. Certain LPs that appreciate the return profile that secondaries can offer have decided to invest early in that development and will likely have the best insight into the market going forward. 

How educated are Asian institutional investors about secondaries?

Asian LPs generally are moving up the learning curve very rapidly. They clearly see the benefits of layering in secondaries managers as part of their overall programs. In fact, we would argue that a few of our Asia-based LPs are among the most sophisticated globally – with dedicated teams and solid experience in direct transactions, LP portfolio acquisitions and fund restructurings.

Are you seeing more competition from global funds chasing secondaries deals in Asia?

On balance, we feel competition from global firms has decreased somewhat over the past few years as certain firms have reduced activity in Asia to focus on transactions in the US and Europe. That can change quickly, however, as the US and European markets shift.

People have said the US is too expensive and Europe has a lot of macroeconomic uncertainty. Is Asia is the best place to find deals?

Since we are an Asian firm focused on Asia, it is hard for us to comment on pricing outside of Asia. That being said, Asia is not for the faint-hearted. Each national market poses its own unique set of challenges and opportunities, and as you drill down to the sector, company, and shareholder-level, those issues become even more nuanced and complex.

What’s your outlook for Asian secondaries in the next 12 months regarding deal volume and fundraising?

We believe the Asian secondaries market has plenty of room to grow. As both buyers and sellers gain more familiarity with deal structures, the provision of bespoke liquidity alternatives should increase. Those firms with the requisite experience in creating and executing those deals will be able to command a larger portion of the transaction volume, and thus LP capital.

Darren Massara has 18 years of experience in private equity in emerging markets and prior to NewQuest was managing director at Bank of America Merrill Lynch. He spent over eight years at the World Bank Group in Washington DC and worked in various capacities for the US Government and the private sector on international trade and investment issues.

Click here to access the Si30 ranking.