Management fee and carried interest terms are getting tougher for GPs in the US and Europe, a trend that hasn't strongly impacted on Asia-based GPs, according to Unitas Capital chief financial officer Sharon Lim, speaking at PE Asia’s CFO & COO Asia Forum 2012.
Lim explained that by and large, Asian GPs are still getting traditional 2 and 20 percent management fees and carried interest, while GPs in the West are having to compromise more.
Moderator Mei-ni Yang, vice president at Hamilton Lane, agreed, saying that Asian GPs still wield more power in their LP relationships due to the increased interest in allocating capital to the region.
However, not all concurred. Gordon Marsden, director of Asia Pacific Investment at real estate services firm DTZ, said that GPs in Asia are also “rolling over backwards” to raise capital.
Yang admits that LPs are probing more thoroughly in Asia than in the past because GPs have shorter track records than those in Europe and the US. In fact, to avoid errors in the extensive reports GPs must now provide to LPs, and to satisfy LP inquires and comply with ILPA guidelines, panellists discussed the need to increasingly use software programmes.
The panel also noted the rapid sophistication of Asian LPs compared to those in the West. Marsden said, “Asian investors have jumped from point A to C without going through B,” alluding to the fact that many sovereign wealth funds in Asia have quickly become direct or co-investors, something that has taken North American and European pension funds much longer.
CVC Asia Pacific senior managing director Hemal Mirani explained that typically Asian SWFs invest with a different mindset than Western pension funds, which have a comparatively short-term payout obligation to the public.
Mirani also noted that not all LPs are suited to use the co-investment model due to time constraints. She said that many LPs right now are looking to make co-investments with GPs, so when selecting which LP to do a deal with, “[You have to] figure out in your investor base who is serious about this, who can get something done.”