In March, the Southeast Asia head of The Carlyle Group, Anand Balasubrahmanyan, left the firm after four years of making no deals in the region. Shortly after, in May, head of Actis Capital’s Singapore office Gary Addison quit the firm. Both are examples of the ongoing turnover trend at Asia private equity firms.
“Compared to other regions, one of the key challenges for global funds with regional vehicles in Asia-Pacific, especially in China, India and emerging Asia, is how to manage team turnover,” Dongao Yan, investment director at Squadron Capital in Hong Kong, told sister publication PE Asia.
Some of the bigger players that have successfully retained people have had a lot of autonomy to run their portfolios
He explained that due to a shallow pool of talent in Asia compared to more developed markets, investment professionals tend to jump between firms more often. For example, PE Asia reported earlier this month that Kohlberg Kravis Roberts snagged TPG Capital executive Akhil Puri as a director for its operational division, KKR Capstone.
Moreover, star deal-makers at large regional firms often feel they have the requisite local experience and relationships to spin-out on their own. For example, in 2010, Weijian Shan moved from TPG to PAG to build its private equity division and Scott Hahn left Morgan Stanley Private Equity Asia to set up Hahn & Co. Last year, Mary Ma also left TPG to start her own fund, Boyu Capital.
Mark Cummings, a fund formation lawyer at Appleby Global in Hong Kong, said, “We see a lot of start-ups and when we talk to the guys we see that most of them did work at bigger [private equity firms]. It is completely understandable for local teams in Asia to leave the bigger players. There are cultural issues, and in Asia raising money and seeking investment opportunities are very much based on relationships.”
To prevent high turnover rates, firms must promote and give autonomy to their investment professionals in Asia, according to Yan. “The top priority is investment autonomy, so [the team] can pursue the investments that they want to do.”
Cummings agreed. “Some of the bigger players that have successfully retained people have had a lot of autonomy to run their portfolios. They have a lot more say at investment committee level and are well-respected.”
He explained that not giving local teams autonomy in their markets can cause regional players to fail to close deals in the region. “[Some foreign firms] are trying to shoehorn their policies into the region where relationships and the culture are different. If firms are not raising money or not doing deals, people won’t stick around.”