APAC Private Equity Investing: Tackling the Obstacles to Find Opportunity

Contributor: Lauren Iaslovits

Fueled by a powerful wave of regional economic growth, Asia-Pacific private equity investing continues to rack up new recruits. Research firm Preqin estimates that 22 percent of managers in fundraising mode currently have APAC in their sights, while advisory group McKinsey & Company puts the market for APAC private equity at roughly $50bn. Private equity investors have responded by ramping up APAC activity, opening offices, raising capital and executing transactions.

As APAC deal-making gathers steam, the need for independently provided services, ranging from accounting maintenance, performance-return calculation as well as cash-flow forecasting and allocation modeling, is likely to move in lock step, as managers work to meet the needs of limited partners for more detailed, accurate and timely reporting.

While investors such as pension and sovereign-wealth funds, insurance firms and family offices look to gain ground through APAC private equity opportunities, they are also demanding the same level of reporting transparency they have come to expect within the traditional-investment world. In its biannual industry pulse-check, accounting and advisory firm EisnerAmpe found that transparency ranked high – 92% – on the list of concerns among limited partners.

This has had a profound impact on private equity due-diligence requirements, and has compelled managers to seek more prudent methods for reconciling data. Particularly as GPs secure a foothold in places like China, India, and Southeast Asia, they will find it increasingly advantageous to offload certain fund reporting and risk-management functions to qualified independent providers. In the process, managers can provide Limited Partners with a higher degree of timely and accurate information, while reducing the time- and capital-intensive burden of handling multi-jurisdiction administrative duties themselves.

As APAC Private Equity investing volumes continue to swell, the unpredictability of spreadsheets and multiple data feeds strengthens the case for automated, front-to-back solutions that can help managers boost their level of preparedness while improving operational efficiency. While offering the independence that LPs (and regulators) require, technology providers need to deliver a much higher level of reporting functionality. Utilizing a time-tested slate of automated private equity software specific to the private equity industry, data can be marginalized. Specifically designed to handle an increasingly detailed fund-management regimen, these fully hosted, comprehensive and customizable solutions reduce the emphasis on spreadsheets that can negatively impact data flow, providing Private Equity firms with increased granularity into portfolio positions, performance and risk exposures.

To buttress LP morale, managers doing business in the APAC region will by all accounts step up their reliance on third-party providers in order to improve operational processes while creating greater value for their investor base. Those that can demonstrate verifiable data-management and risk-mitigation consistency using technologies, such as SunGard’s Investran and strategies specifically geared toward the nuances of this rapidly developing market should reap the greatest rewards going forward.

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