Emerging Markets Private Equity
Engagement at a glance
|Client Country/Type:||South African Public Pension Fund|
|Asset Class:||Private Equity|
|Mandate Size:||USD100m–USD200 million|
|Mandate Geography:||Asia Pacific|
|Return/risk objectives:||Pooled Fund or Separate Managed Account|
|Mandate Type:||Pooled Fund|
|bfinance Services:||Manager Selection|
The client, a South African pension fund, was looking to invest up to USD200 million in private equity with exposure to Emerging Markets and was particularly interested in focusing on opportunities in the Asia Pacific (APAC) region. The client’s main objective was to shorten the J-curve by investing in secondaries or making co-investments alongside direct funds and had targeted an internal rate of return (IRR) of 15% net.
Initially the client sought bfinance’s help in identifying managers with broad and competitive expertise in emerging markets. Drawn to the diversity of the APAC region’s investment universe—and its relative economic resilience during the Covid-19 crisis—the client decided to gather more information about those managers with deep experience in Asia Pacific’s private equity markets.
The client was extremely focused on performance, which was a challenge in comparison to developed market private equity: only a handful of managers had strong (and sufficiently long) track records representative of their fund offerings. Although several promising new managers made it through to the final stages of the search process, most of them were still developing their strategies and were and deemed too early-stage for this particular client.
This client was also closely focused on environmental, social and governance issues (ESG) and paid particular attention to diversity and inclusion amongst the private equity managers.
- Engaging a broad spectrum of prospective managers and strategies: bfinance reached out to a large group of diverse managers in emerging markets to explore the potential for bespoke solutions for the client, whether that entailed an existing commingled fund or a bespoke separate managed account (SMA).
- Conducting in-depth analysis of diverse proposals: Given the client’s evolving geographic focus, some of the managers under consideration had shorter track records, so the team conducted in-depth quantitative and qualitative analysis of their performance.
- Understanding the impact of operating in evolving markets: The implementation challenges of investing in Asia Pacific private equity required careful assessment; bfinance assisted the client in parsing both investment and broader market risks.
- Delivering a tailored solution: The client was able to select a combination of differentiated strategies: one direct commingled program and one bespoke program that blended a specifically targeted set of hard-to-access fast deployment primary funds with co-investments.