GP bottleneck crimps Southeast Asia

Eight countries in Southeast Asia together have comparatively few private equity fund managers, presenting a challenge to LPs seeking exposure to the sub-region. 

Indonesia, Singapore, Malaysia, Philippines, Vietnam, Thailand, Cambodia and Laos have a total of 76 fund managers (102 including venture capital), according to data from PEI’s Research & Analytics Division. 

Moreover, less than half of the private equity fund managers (35) have raised at least two funds. 

At the same time, LPs increasingly want exposure to Southeast Asia. 

“For the next three years, LPs are looking broader at the pan-Asian region, and in particular to Indonesia and Malaysia,” said in a recent interview Stephen Ziff, a partner at Coller Capital. “This is going to have more of a focus going forward than the more established markets like China, India, Australia or Japan.”

Menka Sajnani, senior vice president at Auda Asia, added: “The Southeast Asia story is compelling and it’s obvious the interest level is increasing. But we do think it’s challenging to back the right fund in the region.”  

Fund Managers 

Source: PEI’s Research & Analytics Division 

The relatively few fund managers to choose from makes it most difficult for LPs seeking to commit large amounts.

“If a large institution wants to put a minimum of $50 million into an underlying fund, then it’s a small universe of Southeast Asia-focused funds that will have the capacity to accept that size of check,” added Wen Tan, partner at FLAG Squadron Asia, who said he was providing a personal opinion and not necessarily that of his firm.

By comparison, China has a total of 300 fund managers (who have raised institutional capital), 165 of them managing private equity funds. If Hong Kong is included, the number of private equity firms rises to 240.

Tan added that Southeast Asia does have smaller scale fund managers that have the potential to deliver strong returns, or already have. He is confident the numbers will continue to increase over time. 

“As time goes on, there’s an increasing number of GPs moving past Fund II. Five years ago that wasn’t the case because fewer managers were advanced in their lifecycle,” Tan said. “As with most emerging PE markets, the number of institutionally-investible GPs increases over time.”