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Neuberger taps CPPIB to bolster Asia team – Exclusive

Lydia Hao joins the asset manager in Hong Kong.

Neuberger Berman has bolstered its ranks in Asia, hiring Lydia Hao to focus on private equity investment across the region, Private Equity International has learned.

Hao took up the role of principal on Tuesday, reporting to Kent Chen, managing director and head of private equity in the Asia Pacific region. She joins the firm after seven years at Canada Pension Plan Investment Board in Hong Kong, where she was one of the founding members of the private equity Asia team building its direct investment portfolio across the region.

Hao will also work alongside Amit Sachdeva, also a principal, who joined the firm in 2016 after seven years at AlpInvest Partners in Hong Kong, where he focused on co-investments.

In an interview with PEI, Chen said since he joined the firm in 2015, initially working alongside Brock Williams, who has recently relocated to the US but still remains focused on Asia, he has been “actively building a best in class Asia PE team”.

“While we may not be the biggest team in the Asia PE market, the team is one of the most experienced, collectively having invested substantial amounts of money in Asia in the past decade, through different market cycles,” he said.

“All of the team members are capable of investing across private equity strategies, including primary funds, secondaries and co-investments.”

Chen reiterated comments made by managing director and global head of NB Alternatives Anthony Tutrone last month, who told PEI the firm would happily wait two or three years to find the right person for a role.

“When we are hiring, we are looking for people who are not just from the region and speak the local language, but also have a deep understanding of the Asian culture,” Chen said, adding that, as a global firm with global clients, it also needs people who are able to work in a multicultural environment.

Team members also must have a strong track record of “real investment experience” in Asia, where the private equity market has been growing quickly.

“Every week there’s a new GP starting a new fund. So we need people who know the Asia market inside-out to be able to cover the market sufficiently.”

Chen added that, looking forward, Neuberger Berman would continue to grow its Asia team “as needed”.

“We continue to look for the right candidates to grow our platform. But this is a long term process, we will take our time and wait for the right candidates.”

DIVERSE RISK AND RETURN

Chen told PEI that “despite the headline news” highlighting macro challenges such as a China slowdown, volatility, and slower growth in developed markets, Asia “is still the fastest-growing market”, accounting for between 10 and 15 percent of the global private equity market. Each country offers different opportunities – such as buyouts in Japan, Korea and Australia, growth and buyout opportunities in China, and growth investments in India and Southeast Asia – with a different risk-return profile, giving investors “a lot of diversification benefits”.

In each of the sub markets there are more and more GPs with the right skill-set, platform and track-record for investors to evaluate, Chen said. In recent years, he has seen an increase in both country- and sector-focused funds, as well as both pan-regional and country-specific private lending funds.

“All of this is a sign of a more diverse and mature market. That’s also the reason why we need to grow our team, to be able to serve our clients who are showing strong interest in investing in Asia.”

These developments “are good and bad”, Chen says; good in that a more diverse, transparent and efficient market gives investors more choice, but bad in that it poses new challenges, particularly for investors with limited resources.

“In the old days, it was quite straight-forward, just pick a few pan-Asian funds for exposure to Asia. But now with so many different country- and sector-focused funds and different strategies, you need to have people not just on the ground but who have the right local knowledge to do a proper job.”

Larger institutional investors which make big commitments to Asian funds are also running into difficulties when it comes to executing co-investments.

“Because of the diversity of these sub markets, it’s quite difficult for them to execute Asian co-investments from a distance. So in reality very few investors are taking up their co-investment rights and as a result they cannot use co-investments as a tool to lower the effective fees in their Asia PE portfolio.”