France's world-famous Le Mans 24-hour car race is, as the name would suggest, a test of endurance. It is also, in at least equal measure, an examination of nerves. Two examples illustrate this well. In 1955, a car driven by Pierre Levegh cartwheeled off the circuit and into the trackside crowd, killing Levegh and 80 spectators. Although this tragic incident led to a string of new safety measures being introduced, until 1970 the traditional “Le Mans start” prevailed. This involved drivers having to run to their cars and jump into the cockpit before they could turn the ignition, engage the gears and head full pelt for the first corner. Putting speed over safety, many drivers failed to first secure their safety harnesses.
Things are a little different now – the Le Mans start has thankfully been consigned to the past – but Le Mans would not be Le Mans without the frisson of danger. Hence, it follows that Anil Thadani, founder of Singapore-based pan-Asian private equity firm Symphony Capital Partners and a regular competitor in the “Le Mans Classic”, is a man well acquainted with risk. It's sobering to consider therefore, that Thadani, one of Asia's most experienced private equity investors, is less than comfortable with the risk of investing in the region over a typical private equity timeframe. Fear of coming to grief in a high-speed car race is, one might conclude, a less unsettling prospect for Thadani than short-term investing in Asia.
All of which helps to explain why Symphony recently listed a vehicle called Symphony International Holdings on the London Stock Exchange, in the process raising $200 million from the first IPO of a pan-Asian private equity firm. Institutional investors, family offices and high net worth individuals from the UK, Europe and the Middle East participated in the flotation, with Symphony's management buying shares worth $10 million.
The IPO's success was notable at a time when listings of other private equity firms and funds have been performing poorly in the after-market. For example, since listing on 27 June, global giant The Blackstone Group has seen the price of its units listed on the New York Stock Exchange trade consistently at around 20 percent below their issue price (despite a tripling of the group's profits in the second quarter of this year compared with the second quarter of 2006).
Perhaps the strong level of support for the Symphony IPO indicates a groundswell of investor opinion in accord with Thadani's belief that evergreen capital is the best way of seeking to dilute the impact of Asia's volatility. In a recent interview with hotelsmag.com, he reflected on the period from 1997 to 2003 as “the worst period we have ever had” [in Asia]. During that time, the region witnessed such stomach-churning events as: currency devaluations in Indonesia and Thailand; devastating bombings, including the 2002 Bali terror attack; SARS and bird flu outbreaks; and severe earthquakes.
Nor have the subsequent four years exactly been an oasis of calm and tranquillity by comparison. In December 2004, the infamous tsunami devastated much of South Asia, while many of the perils mentioned above, such as disease and terrorism, have continued to cast their shadow.
It is important to note at this point that Symphony perhaps has more reason than most private equity firms to be sensitive to risk given that it targets consumer-oriented businesses. For example, Thadani co-founded Amanresorts, a luxury spa and wellness resort in Thailand in 1987. An investment in Minor International, a leisure and lifestyle company in Bangkok, has reportedly been the firm's most successful bet to date. Just the sort of businesses, in other words, that might be considered highly vulnerable to temporary shocks to the economic system.
It's also pertinent to consider that concerns about Asian risk go somewhat against the grain these days. Long considered a bleeding edge investment destination, many observers claim that the region is now characterised by increasing stability and that any future shocks are more likely to emanate from outside rather than within the region (a view reinforced by the current credit crunch, with its origins in the US sub-prime market, but which wreaked havoc on stock markets around the world, Asia included).
But Thadani apparently has a mission to make Symphony “Asia's Berkshire Hathaway”. And as far as he's concerned, that's not something to be undertaken without first making absolutely sure the safety harness has been fastened.