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The change will serve to emphasize the operational demarcation between CLSAÆs private equity business and the rest of the CLSA brokerage and investment banking operations. This move sets parameters that firmly establish their modus operandi in an environment where private equity has become the flavour of the month - and where best practice has to address conflicts of interest with investment banking departments, in the race for annualized internal rates of return of 20% plus.
CLSA Capital Partners, which is based in Singapore and Hong Kong, now has funds under management in excess of $1 billion and has a further $1 billion available in third party equity co-investment and debt capital from Credit Agricole.
ôQuoted companies donÆt account for 100% of the Asian growth story. Factoring back in the type of deals with unquoted companies to which private equity can get you market access can make up that difference,ö says Gary Coull, executive chairman of CLSA Capital Partners in Hong Kong.
Even though Asian private equity is the latest hot commodity, it has taken Canadian Coull a quarter of a century to become fashionable overnight, having spent 25 years in Asia and 18 years with CLSA, working in the investment banking, brokerage and now building its private equity business. He adds. ôPrivate equity opportunities are almost limitless û providing you have the ability to pick the right businesses. For example in China, there are so many entrepreneurs. It is such a big place. Right now, we seek domestic demand plays there, well-managed companies that make and service things.
Some private equity houses prefer to find Chinese managers who have studied abroad and present themselves with a user-friendly, western polish. CLSA CapitalÆs Coull is rather more pragmatic and casts his net wider.
ôGood managers can be hard to find, but there are many impressive self-made young businessmen there in their thirties and forties, who have not been schooled abroad û theyÆre ten years younger than the cultural revolution generation.ö
CLSA Capital invests through four funds, each of which operates and invests under a specific theme. The $475 million Aria Investments fund provides growth capital to established Asian companies, that cater for domestic demand û for example: consumer manufacturing.
The Fudo Capital fund has $430 million for opportunistic real estate investments û half of which is planned to be invested in Japan.
The $200 million MezzAsia fund provides leveraged finance for buyout transactions and mid-cap companies, investing in mature businesses with reliable cashflow streams. Lastly in the CLSA Capital stable is Sunrise Capital Partners, which is equipped with $325 million for growth and mid-market buyouts identified in the rebounding Japanese economy.
The next CLSA Capital fund that looks likely to be launched will have a Pacific transport theme, looking at regional shipping and transport. It is not envisaged that this will be an infrastructure play but rather will be weighted towards regional trade.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.