At an event held in New York last month by sister publication Private Equity Real Estate, hospitality investment titan Barry Sternlicht favored the crowd with some candid comments on the effects of globalization.
The only thing that will disrupt the increasing globalization of the world economy, he said, would be national regulatory reactions against it. Even this, he said, would only serve to slow – not stop – the flood of capital around the world in search of opportunity. Sternlicht, the founder of W Hotels, among other international businesses, made a semi-joking aside about the US having had a ?good century? behind it, but needing to face the realities of playing economic third-fiddle to the hugely ambitious populations of India and China in the coming century.
Do GPs who never stray beyond the US or UK face a similar decline? Private equity GPs are paid to produce returns for their investors, and while top-quartile, top-decile returns will likely always be attractive, as the mature markets of North America and Western Europe grow ever-more crowded, average returns will fall.
In fact, those Western private equity firms intent on staying in the top quartile know that a serious oversees presence is all but required to stay competitive on returns. Witness the accelerating rush to Asia on the parts of the major US and European private equity firms, some of which only five years ago were giving speeches about sticking to their domestic knitting.
This issue of Private Equity Manager is all about managing the operating, regulatory and personnel complexities of a global firm. We've tried to include articles on best practices that are both highly practical and highly strategic. For example, you'll find an article by Rob Kotecki on video-conferencing systems. Every global private equity firm by now has confronted the logistical challenge of trying to hold a meeting with people in Europe, North American and Asia at the same time. This can be a real drag, but superior communications technology helps, as a growing number of firms are discovering.
Judy Kuan writes about the challenge of hiring portfolio company support staffs. Finding a good team is already a major challenge in the US. When operations are expanded to India and Eastern Europe, private equity GPs on the lookout for talent are sometimes confounded not only by what they don't know, but, as Donald Rumsfeld has put it, by what they don't know they don't know.
Enjoy the issue,
By David SnowDavid.firstname.lastname@example.org