LGT Capital Partners has opened its first China office in Beijing to address the increasing competition in the mainland market, LGT partner and head of Asian private equity Doug Coulter revealed to Private Equity International.
As China’s private equity industry matures and competition becomes fierce for funds of funds in Asia, firms must begin to differentiate their capital and have local teams on the ground, he said.
“It is going to be a lot harder to generate the returns we have historically seen so we are going to work harder and our GPs are going to have to work harder and capital has to be differentiated going forward.”
“There is going to continue to be very active dealflow across all our main businesses – that hasn’t changed,” Coulter said. “What is changing is [the] increasing competition from all angles, be it the formation of onshore RMB funds of funds or firms that have positioned themselves as China experts.”
LGT will continue to focus on primary, secondary and co-investing opportunities in China, and the Beijing office will serve as a hub for due diligence and portfolio management. Over the next 12 to 18 months, LGT plans to build a local team of permanent Beijing-based staff, Coulter said.
The Beijing office will be headed by Frankie Fang, who has been serving as LGT Capital Partners' China representative since 2007. The firm held a ceremony that was attended by a spread of GPs, LPs, government officials and regulators.
“The reason we are investing in China is that it is strategic to us, it is a compelling story about growth that is going to continue for the next decade at least. But, at the end of the day, the lessons learned from investing in private equity in mature markets – a lot of those lessons apply in China,” he says.
LGT is a Switzerland-based asset manager, with investment offices in Zurich, New York, Hong Kong and now Beijing. The firm held a final close on its oversubscribed global secondaries fund at $2 billion in February.
Asian institutions accounted for about 19 percent of the investors in the Crown Global Secondaries III. LGT Capital Partners has over 80 private equity professionals globally and manages close to $20 billion of private equity capital, according to the firm.