The private equity arm of the Guardian Life Insurance Company of America has teamed up with independent asset manager 57 Stars to invest $100 million of Guardian capital over the next three years in select emerging markets.
The initiative represents Guardian’s first entry into emerging market investing aside from various debt assets that indirectly gave the insurance company exposure to the strategy.
Guardian made the decision to invest in emerging markets shortly after it began committing to private equity funds in 2006, but spent more than two years analysing regions on a country by country basis and conducting an exhaustive search for the right manager to invest with.
“We really wanted to make sure that we were well established in the North American and Western European markets first before we would add emerging market exposure,” said David Turner, head of private equity for Guardian Life. “We really chose 57 Stars because they were willing to work with us on a separate account basis and customise the portfolio.”
“It’s our firm belief that based on China’s presence in Asian markets and as a global economic engine that the growth phenomenon there is likely to continue for probably the next several decades,” Turner said. “We’re really looking at this as very much of a long-term play for ourselves.”
Guardian will target growth opportunities in South Korea, Japan, Australia and New Zealand as a “sub-set” of Asia, Turner said, and will also look for opportunities in India and smaller countries in the region.
“Among the challenges in India is identifying pockets of inefficiency that are compelling on a risk-adjusted basis to the global private equity investor,” said managing director at 57 Stars Steven Cowan. “India will over time be the largest country in the world in terms of population. That said, we believe the GPs with whom we are working have identified such opportunities and have the potential to generate very compelling out-performance as a result.”
Formerly known as PCGI, 57 Stars underwent a management-led buyout and name change that was finalised in February. The firm invests in private equity partnerships and co-investments in select private equity markets outside the United States and Western Europe.
In Latin America, Guardian will target investments in Brazil, Columbia, Peru, Chile, Argentina and eventually Mexico.
While Guardian and 57 Stars have identified specific countries in select emerging markets in which they will invest, the strategy will not have a specific sector focus.
“We want to put together a starter portfolio of the very best GPs in these specific regions and specific countries who themselves are really generalist investors,” Turner said. The partnership has yet to deploy capital from the $100 million account.
Guardian’s private equity arm has a long term target of 2.5 percent of total assets, compared to a current actual allocation of about 1.2 percent. Turner declined to confirm the size of Guardian’s assets under management, but sister data provider Private Equity Connect pegs the figure at more than $33 billion.