upfront with partners group, the swiss alternate assets manager (pei asia, june 2008)

7/26/2019 Upfront with Partners Group, the Swiss alternate assets manager (PEI Asia, June 2008)

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20 / PEIASIA / JUNE 2008 C OP YI NG W IT HO UT P ER MI SS IO N F RO M P EI A SI A I S U NL AW FU L

For a firm that set up its first office in Asia

in 2004, Partners Group has come a long

way since. Having launched its Singapore

office four years ago, the alternative assets

manager has expanded its Asian presence

by establishing three further offices in the

region in just the last 10 months. Thats

impressive progress by any yardstick.

The Asian drive has been spearheaded

by Philipp Gysler, head of Asia, and

Christoph Rubeli, head of markets Asia.

The two work in tandem on opportunities

in the region. While Gysler focuses more

on the investment side of the business,

Rubeli is dedicated to business develop-

ment and new ideas and initiatives.

However, Rubeli points out that theirroles and responsibilities are not mutually

exclusive. For example, Gysler is occasion-

ally involved in fundraising efforts while

Rubeli gets involved in investments from

time to time. Its not black and white, he

says.

Rubeli shuttles back and forth between

the headquarters in Zug and Singapore,

while Gysler, who helped build Partners

presence in the US when the firm estab-

lished operations there, will be based

permanently in Singapore from late June

onwards.

He is technically the overall head of the

Asian effort, says Rubeli of Gysler.

Partners Group managed approximately

CHF24 billion ($23 billion) in assets as of

31 December 2007, of which private

equity assets made up CHF16.7 billion, or

about 70 percent.The firm has more than

250 partnership investments in more than

150 GPs. In addition to its four Asian

offices, it has six others around the world.

THE FIRST WAVE

At the turn of the decade, many investors

around the world were still contemplating

whether or not to buy into the Asian

growth story. Some were sceptical about

the rapid expansion of Asian economies

given that the Asian financial crisis of

1997 was an event from the not-too-

distant past. For many, the ramifications of

the crisis were considered still too

profound to allow them to consign all

thought of it to the past.

What was it that convinced Partners

Group, one of the earlier funds of funds

arrivals, to venture into Asia four years

ago? Rubeli says that by 2003, it hadbecome apparent that things in Asia had

changed and, as compared to the 90s,

many of the reasons that prevented us

from being active in Asia had actually

changed.

Rubeli refers to the ingredients of a

potentially attractive private equity

market that were already in place - aspects

that were changing for the better, and the

promise of the future.

There were certain economic trends

that had been prevalent for a while, Rubeli

says. He talks of an excellent top-down

picture with very solid growth, and the

rapidly growing local consumption in the

region. While growth was characterised by

cheaper manufacturing costs and exports,

there was also rising demand within Asia

that was building up.

Partners Group saw the maturing of the

Asian private equity industry by 2003.

There was a new development, or a new

phase of private equity and venture

capital, which evolved around Asia which

we actually believed in performance terms

looked much better than anything we

could see around the globe, says Rubeli.

Prior to 2003, he says, private equity fund

managers in the region were very young,

somewhat inexperienced or were prob-

ably just pursuing themes that were not

that relevant to the market anymore.

But the projected growth of the Asian

private equity market was difficult to

ignore. The firm estimates that Asian

private equity will account for about a

third of the industrys size globally in a

few years time. We estimate that around

2012-2014, the Asian time zone will

represent about a third of the funds raised

and about a third of the deals done around

the globe, says Rubeli. Such growth

would put it at par with the US and

Europe in terms of size and importance.Rubeli says that it is certainly a develop-

ment you cannot ignore and one that we

as a global firm wanted to take very seri-

ously and be one of the early adopters of

the trend.

The firm had sufficient conviction to set

up programmes for Asia Pacific and made

the decision to expand systematically into

the Asian time zone.

WAVE NUMBER TWO

Since last year, the firm has begun estab-

lishing more of a local presence and has

opened up offices in three new locations

in the region. This stems from the belief

that many of the markets in the region

have evolved and are now sufficiently

special to warrant their own effort.

The growth and development of private

equity markets in countries such as China

has led Partners Group to decentralise its

operations. Rubeli says that in China there

Motoring along

U P F R O N T : P A R T N E R S G R O U P

Swiss alternative assets manager Partners Group, one of the first

global funds of funds managers to set up shop in the Asian region,

has also been among the most dynamic. Siddharth Poddarreports

on the firms progress.


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C OP YI NG W IT HO UT P ER MI SS IO N F RO M P EI A SI A I S U NL AW FU L


is so much happening that its difficult to

keep track of the market and follow it on a

daily basis. The market in itself is huge

and there are big distances even within

China that you have to manage, and wefelt that Singapore is no longer the ideal

location to do this from.

Among the primary reasons for the

decentralisation drive was the desire to be

close to fund managers and be an active

counterparty in whatever they were

doing. The firm also wanted to be in the

heart of where a growing number of

limited partners are based. The available

pools of capital in Japan and increasingly

Australia, owing to its rapidly growing

superannuation funds with their demand

to access more products, are an attractive

proposition for the firm. It wants to

essentially follow those clients more regu-

larly in their own market and customise

and adapt our service offerings.

Rubeli sees further growth ahead.There

are many new markets that are developing

beside the traditionally major players such

as Singapore, Hong Kong, Japan and

Australia. There have been developments,

for example, in Southeast Asia in countriessuch as Thailand and others where institu-

tions are considering in earnest to start

alternative investment programmes.

Similar developments are taking place in

Taiwan and Korea, he says.

The firms expansion began taking form

with the establishing of an office in Tokyo

in September last year. It was soon

followed by the setting up of a Sydney

office in April this year, and its most recent

office in Beijing in May.

GROWING, ADDING

The firm currently has a team of about 20

on the ground in Asia, a number which

Rubeli says will grow rapidly towards the

end of the year. It is currently making

additions to its team and has hired a

number of staff in its Swiss office and else-

where who are currently being trained to

work across the Asian region.

Singapores role, in this decentralised

and somewhat altered context, will not

change much, but it will be enhanced,

Rubeli says. It will remain a hub for the

firms investments and is likely to evolve

into more of an operational hub as well.

The firm decided that some of the opera-

tional tasks and some of the back-up

systems will be managed or co-managed

out of the Singapore office, and in the

process, there will be more people in

Singapore helping the firm with its infra-

structure.

Partners is also considering adding other

business lines which have until recently

been less relevant to Asia, such as the

mezzanine practice. In Rubelis view, the

mezzanine space in the region is seeing

significant development and there is a

distinct possibility that the firm will have

dedicated staff pursuing the mezzanine

business in Asia.

The firm is also increasingly investing in

real estate and infrastructure in Asia,

which will also add to the size of its team.

It has already grown its real estate team

and recently shifted three people from its

San Francisco office to Singapore.

Flexibility seems to be the buzzword of

the firm. It claims a willingness to increase

or decrease the scale of its operations in

any particular region or segment of the

asset class without conforming to a rigid

JUNE 2008 / PEIASIA / 21

We estimate that around2012-2014, the Asian timezone will represent about athird of the funds raised and

about a third of the dealsdone around the globe.

Rubeli: Asian growth trends impossible to ignore


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blueprint. A number of people on its team

work on deals from across regions and of

various types. Although there are a

number of specialists in each of the

domains to make sure that the technical

discipline is added where it is needed

thats a small nucleus of people. The

remainder are more generalist, but know

the landscape well and have local relation-

ships.

Were less organised into little boxes,

where you have an infrastructure

Southeast Asia person and an infrastruc-

ture Northeast Asia person that go to an

Asia person, and that links into the globe.

We dont quite manage it that way.

THE ASIAN PORTFOLIO

Partners Groups portfolio of Asian private

equity investments has been rising rapidly

over the last four years. Rubeli says the

firms allocations to Asia have grown in

line with that of the Asian private equity

market. On the private equity side, the

firm presently has relationships with

about 25 funds in Asia, a number that is

likely to increase. Investments in the

region have become a very solid compo-

nent in terms of its clients portfolios.

He says the performance of investments

in the region has been very good and adds

that he does not have one fund relation-

ship in this region that we would not

continue with.

The group will be adding about 10 to 15

more funds to its new investment

programme. He remains bullish on Asia

and says that there is a lot of new talent

that we might be able to back.

About half of the firms private equity

funds are flowing into India and China,

but other building blocks of client portfo-

lios are Australia, Japan and Korea. Most

of our clients prefer a balanced offering

that includes some of the mature

economies of Asia, where you indirectly

benefit from the rapid growth of India and

China, and some direct exposures to these

time zones, he says.

When queried about the firms next

potential location for an Asian office,

Rubeli says that the firm will probably

maintain four offices in the Asia Pacific

region for the time being, and its a bit

premature to discuss further extensions:

But if there are other markets which are

showing the characteristics of an Australia,

a China, or a Japan, then we might

consider that. We have discussed India - we

felt it was a little bit premature but might

happen over time.

When asked why Beijing was preferred

as the China base over Shanghai or Hong

Kong, Rubeli acknowledges that, from aninvestment perspective, it could have been

any of the three cities.In each of the loca-

tions we have a similar number of fund

relationships. Expansion capital is more

Shanghai-based,buyouts and more mature

companies are more Beijing-based, and the

large-cap is more Hong Kong-based.

However, the decision makers, the

regulators, and a lot of the policy-makers

are sitting in Beijing. We also wanted to

show them that we are not like any other

Western firm going to where its most

convenient and we wanted therefore to

open in Beijing to be close to those policy-

makers and regulators as well as the poten-

tial LPs and to go from Beijing across the

country in a very Chinese fashion, which

is probably done best from Beijing.

Whether destination number five will

be Mumbai or Hanoi is anybodys guess,

but you can be rest assured that, whatever

the choice, Partners Group will have good

reason for making it.

22 / PEIASIA / JUNE 2008 C OP YI NG W IT HO UT P ER MI SS IO N F RO M P EI A SI A I S U NL AW FU L


If there are other marketswhich are showing the

characteristics of an Australia,a China, or a Japan, thenwe might consider that.

Gysler: setting down roots in Singapore

upfront with partners group, the swiss alternate assets manager (pei asia, june 2008)

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