Five Minutes with Jason Sambanju

Global secondaries firms are increasing both their Asia capabilities and allocations. Paul Capital’s co-head of Asia Jason Sambanju discusses how he believes these firms should approach the region.

What kind of competition are you seeing in the secondaries market in Asia now, and how has it changed?

In Asia, the dynamics are quite different [from Western markets]. There are no intermediaries in Asia, or very few – one or two, and I wouldn’t say that [they] do secondary intermediation full-time. That being said, the lack of intermediation means that you have to go and find your deals, and there’s a fair amount of work that needs to be done. [Paul was one of] the first dedicated secondaries firm to set up in Asia five years ago and at that time there were us and maybe two others. Since then, competition has increased five-fold – though that’s not saying much.

In conjunction with the increase in players, there is an increased awareness, and with that more deal volume. Before, a lot of people just didn’t understand that they could sell their private equity interests. So when we got out here and had to justify our existence and our salaries, we got out there and started generating deals, which required educating the market. Once that happened, more players came in and you got a multiplying affect.

What is the most difficult part about choosing GPs in Asia?

In Asia, [it] is just the lack of information – although it is not necessarily because these GPs are not willing to disclose the information. [Secondaries] comes down to the quality of GPs, [and to determine that] we look at their track record, standards and strategy. Team stability is also important, because this is a people business – a couple of changes in the team can severely disrupt the entire firm. But very often, these GPs [in Asia] simply haven’t been around long enough for you to be able to discern a real pattern. If a team has been working together for twenty years, you understand what their business patterns are.

But for a team that’s been working together for five years – well, what do these five years really say? Have they invested into multiple cycles? Have they been through rough times together? Have they invested multiple funds? Have they had some losses? Have they gone through the hard times? All these questions are the kinds of questions that only time will tell, and as Asia matures, we’ll start to be able to better discern who the quality players are.

Since the secondaries market is relatively new in Asia, how do you convince your LPs to invest in your firm?

Basically we have to convince them that we are good GPs. In Asia, [this means] flying out, meeting with the companies, doing site visits, doing a lot of the things that GPs do, which is why we hired two ex-GPs. I’m an ex-investor and so is my co-head Lucian Wu so we know what questions to ask.

In the US and Europe, you sit there with the GP and ask them all the questions, do some desk research, and you kind of take [their answers] at face value. Here, you have to do that [as well], but then you have to also go out and get more information because in Asia it’s never the first layer that gets you the answer – it’s always the second, third and fourth layers. You need to understand those second, third and fourth layers before you can price appropriately. Knowing how to get information in Asia is not the easiest thing. You need to know how to ask the question the right way and if you don’t get the answer from that person, then you need to find another source.