Technology is playing an ever-greater role in private equity and GPs that focus on using technology will become the ‘next generation’ managers, Suyi Kim, managing director and head of Asia Pacific at Canada Pension Plan Investment Board, said in Hong Kong last week.
“I believe the next leading generation of GPs are the ones that can adapt and incorporate technology into their investment process and value creation,” Kim said at the HKVCA Asia Private Equity Forum. “As with any disruptive trend, this may appear a fad at the start, but we will eventually see an exponential rise until it becomes the new normal.”
Kim also noted that the next breed of GPs will include captive platforms from technology companies such as Softbank, Alibaba, JD.com and Tencent, as they tap on their deep knowledge in technology and vast network in the new economy to source deals and add value.
CPPIB is an early investor in Alibaba, having first invested in the Chinese e-commerce giant in 2011. Today, the Canadian pension’s more than $300 million stake in the company is one of its prized assets, having increased its stake the following year after its initial investment and then again through the IPO in 2014. Last year, it also invested $250 million in Meituan-Dianping, China’s largest service-focused e-commerce platform, alongside Tencent, Trustbridge and other investors through a Series C financing. The Toronto-based pension has also backed tech-focused GPs such as Silver Lake and Hillhouse Capital, according to PEI data.
In addition, Kim noted that private equity is moving from a ‘buy and sell’ strategy to ‘build and sell’. “The increasing need to have an edge to win transactions, given intense competition and rising valuations requires the buyers to get more serious about what kind of value they can bring over their hold period.” As such, Kim expects to see further specialisation on GPs’ value-add for their portfolio companies. CPPIB, for example, teamed up with Baring Private Equity Asia in the $4.3 billion take-private of education provider Nord Anglia. PEI understands the firm is set to acquire international schools brands in the region, as it expands its global portfolio of schools.
CPPIB has invested approximately C$66.6 billion ($53.3 billion; €43.6 billion) in Asia as of 31 March, of which C$10 billion is in private equity.