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Is Asian Private Equity a Safe Harbor in Troubled Seas?

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Is Asian Private Equity a Safe Harbor in Troubled Seas?

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PR Newswire

NEW YORK, Aug. 30, 2018 /PRNewswire/ -- CEPRES, the leading investment decision network for private markets, today released new research on the benefits of Asian Investments for portfolio diversification and risk mitigation. By analyzing over 5,500 Asian PE deals diligenced between LPs and GPs on their network, CEPRES discovered most Asian PE deals are driven by revenue and margin growth versus the more common pricing and leverage factors found in US and European buyouts. In developed markets, PE-backed company valuations are highly dependent on market pricing and returns are heavily driven by leverage. Conversely in Asia, CEPRES found revenue and margin growth are driving returns and so there is less correlation and hence risk in case of a market correction.

Highlights:

  • Analysis of 5,500 Asian PE deals versus 55,000 western PE deals
  • Asian PE deals do not exhibit any greater risk than western PE deals
  • Value creation and investment returns in Asia are driven by strong growth fundamentals, rather than market pricing and leverage

The full report is available to CEPRES members from: https://www.cepres.com/latest-intelligence-for-lps

Commentary:

Even though absolute performance of Asian PE Investments are somewhat lower than their Western counterparts, any portfolio can benefit by adding some Asian investments. There is a strong reason to add Asia to a portfolio: Value Creation is driven by other factors that provide a hedge. In a portfolio context, this creates broader multi-factor influence and a heterogeneity of potential risk factors.

In highly diversified portfolios, on a stand-alone basis, Asia's systematic (market) return is not outperforming. The evaluation of benefits generated by adding a larger number of Asian investments is the independence of their systematic return generation from valuation-multiple expansion: Portfolio companies Enterprise value is driven by improving operations which still are weak at many Asian companies and where a high potential exists for active managers to improve.

Dr. Daniel Schmidt, Founder & CEO, CEPRES

About PE.Analyzer

PE.Analyzer is an online investment decision network for private markets investors. Via a secure online platform, 1,000s of institutional LPs and GPs have directly exchanged investment data on 65,000+ private market investments and portfolio companies worth $21.5 trillion USD. This has transformed the efficiency and timeliness of private markets due diligence and portfolio management for all participants.

About CEPRES

CEPRES is an innovative FinTech company helping investors and fund managers in private markets become stronger investment professionals through advanced tools, thought leadership and deep investment data. Through CEPRES, Investors (LPs) and fund managers (GPs) can interact on a single, confidential platform in complete privacy. LPs gain deep market insights, forecast investment outcomes and enhance due diligence to drive better investment returns. GPs can manage their track record, precisely benchmark their deals and find new sources of capital from around the world. For further information, visit www.cepres.com.

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SOURCE CEPRES

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