Hong Kong: CLSA Capital Partners is finding the bulk of its investments with Chinese and Indian firms whose growth is geared to local consumers, not the slowing U.S. economy, the head of the alternative asset house said on Tuesday.
CLSA Capital, which manages about $2 billion in private equity, property, and hedge fund assets, has also had little difficulty financing investments despite the global credit crunch, added Richard Pyvis, its chairman and chief executive.
“We focus on old economy opportunities, so we tend to look at, frankly, things that I can understand ... things that linked into our underlying hypothesis of continuing and growing domestic demand across the region,” he told a media briefing.
He added the firm was also finding abundant opportunities in Japan.
Asian private equity funds under management rose by almost a quarter in the first half of 2007 to $171.2 billion from a year earlier, Asian Venture Capital Journal (AVCJ) said in July, with China the hottest market for new funds.
The inflows came before a global financial turmoil, triggered by the meltdown of the U.S. subprime mortgage sector, slammed into financial markets and hurt the ability of many private equity firms to finance buyout deals.
This has not been the case for CLSA Capital, part of the Asian investment banking arm of French lender Credit Agricole, because it invests in non-Japan Asia on a largely unleveraged basis, Pyvis said.
For cases where it uses leverage, such as property and Japanese buyout deals, the firm has had little trouble accessing capital, he said.
“We’re just in the process of closing two transactions in Japan, two buyouts, one public and one non-public. In one of those cases we had used debt relatively conservatively and we’ve been able to secure more than one source of debt,” he said.
“The pricing is well within our expectations. That’s in Japan, which is perhaps not typical of the rest of the region. We have not been in the buyout business in Asia ex-Japan. That’s been quite a conscious decision.”
Pyvis said the repricing of risk would ultimately prove healthy for investors in the region, particularly in the mezzanine financing space, where CLSA operates through its MezzAsia Capital fund.
At the same time, the “bucketloads” of money raised by private equity managers to invest in the region meant the battle for deals would remain intense.
“I expect the competitive pressure to continue if not increase,” he said.
Pyvis also said the only sector where CLSA Capital was currently fundraising was for its mezzanine fund.
But he said additional fund launches could be expected at some point, without specifying which kind.
“The only caveat is we won’t raise funds that cannibalise our existing products,” he said.