We believe that an investment with us represents an attractive opportunity for the following reasons:
Substantial and Differentiated Deal Flow
Our primary sources of deal flow result from proactive origination efforts, including outbound calling campaigns to corporations (both shareholders and equity issuers), General Partners, Limited Partners, intermediaries and other market participants. Though the team is likely to be invited to nearly every competitive situation in the private equity secondaries market, we will continue to focus on the small and middle market segment of the private equity secondaries market where transactions are more often completed in a less competitive environment.
Asian Approach to Sourcing and Investing
The team operates on a truly Asian basis, operating from three separate offices in Tokyo, Taipei, and Singapore. All members of the Investment Team have extensive local working experiences and networks, and most of them speak one or more Asian languages.
The team will not seek to create value via financial engineering, rather via making sound investments in fundamentally strong companies and generally not through extensive leverage. Consistent with the past investment activities of the team, a significant amount of time will be spent on developing sound business plans early in the investment evaluation process, and following investments, working closely with the portfolio company management teams to execute these business plans.
Lower Mortality Rate
We focus on investing into later-stage companies with substantial revenues and at or near profitability thereby mitigating the high mortality rate of early-stage ventures.
By buying at discount of book value, our secondary funds are able to provide downside protection thereby shortening the J-curve while producing attractive risk adjusted returns.
No Blind Pool
We adopt a bottom-up valuation process and see through the financial situation of every company we intend to buy, including individual portfolio companies of LP Interests. We also focus on investing in LP Interests which have passed the investment periods, so the surprise from General Partners buying new companies without our valuation is limited.
Less Sensitive to Business Cycle
Funds that acquire assets from secondaries transactions enjoy an inherent hedge that makes them less sensitive to the business cycle. In a bear market, secondary funds enjoy strong deal flows due to financial distresses of sellers, a compelling reason for institutional investors to invest. In a bull market, portfolio companies are able to exit through IPOs or trade sales, often at full valuations. Hence, secondary fund managers are able to realize and lock-in returns on their investments. The fact that positives are present in both bull and bear markets suggests that secondary funds are less sensitive to business cycles, compared to direct private equities where the boom and bust are more pronounced.
We have accumulated deep experiences in dealing effectively with the management teams of small to mid-sized companies. The management teams of such companies, from our experiences, tend to adopt a rather conservative management outlook honed on local practices. We have developed a management friendly reputation and successfully did transactions and exits that have been mutually beneficial to the management teams of such companies and ourselves. In this regard, we believe the management teams of the target companies we intend to approach will more likely feel comfortable, and support us in moving the transactions forward.
Very few competitive players exist in these attractive Asian secondary markets, which means pricing opportunities based on exclusive negotiations still abound.