Wanted: Asian LPs

If private equity in Asia is to become a mainstream asset class, the industry needs to concentrate on building an Asian LP base.

This was the message put across by Paul Yang, executive vice president and CIO of Taipei-headquartered China Development Financial Holding, while he was interviewed recently by Carlyle Group managing director David Tung at the fourth annual PEI Asia Forum in Hong Kong.

Yang said the economic downturn had highlighted the Asian private equity industry’s dependence on the West for capital and also suggested the typical GP/LP contract might have to be reconsidered in the Asian context – a point that was heard a number of times at the conference.

“To my mind, the GP/LP arrangement is a product of the West,” said Yang. “Increasingly we are seeing separate accounts, changes allowing LPs not to have to wait 10 years to get their money back, partnership programmes with corporates, more access to co-investment, and more flexibility on the part of GPs…To really grow this, ultimately the way we manage clients’ money will have to be more multi-faceted.”

Click below to hear excerpts of the onstage discussion between Yang and Tung.

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