Limited partners considering direct  route  for India  investments

Limited partners considering direct route for India investments

The San Francisco Employees’ Retirement System (SFERS), which manages over $17 billion (Rs66,980 crore) in funds and is a significant investor in private equity funds globally, has recently invested in Hong Kong-based fund-of-funds Squadron Capital Management Ltd, that puts money into private equity (PE) funds in Asia.

It plans to make two more similar investments in the region.

In the past, funds from SFERS have reached India through investments in American PE funds, including those run by Texas Pacific Group (TPG) and Blackstone Group.

“SFERS will get more active making direct investments into funds," said E. David Ellington, trustee and commissioner on the SFERS board, who has been coming to India for several years. Ellington’s announcement, made during the course of panel discussion on limited partner (institutions who invests in PE funds) strategies in India at the Asian Private Equity & Venture Forum in Mumbai on Wednesday, is a sign of maturity in the Indian PE investment scenario, showing that some LPs are comfortable moving one step deeper into India.

His point was partly reinforced simply by the presence of his co-panelists—Lindel Eakman, managing director of private markets group for University of Texas Investment Management Co. (Utimco) and Kenneth Shimberg, managing director at the Brown University Investment Office were in India for the first time, looking to get more comfortable with India as a destination for their university endowment funds.

The five-member panel, including Patricia Dineen from Siguler Guff & Co. Llc. and Doug Coulter from LGT Capital Partners Ltd, is likely the first full panel of LPs to speak here about their investment plans at a public forum.

The LPs said this is the time to build relationships with private equity fund managers in India and agreed that the environment is becoming more competitive— on both sides of the fence.

In fact, top performing funds have investors chasing them and some LPs are getting turned away. Shimberg of Brown University, which manages an endowment worth $2.8 billion, said that they have a concentrated portfolio in North America and Europe of around 15 PE managers, but will likely put smaller investments across more funds in India.

The challenge will be for PE fund managers to differentiate themselves and get some of this money given that LPs are walking around with a long list of funds to choose from. The LPs on this panel said they favour those with experience on the ground in India.

Ellington said, “I find that in this market in particular, it is very important to deal with local folks."