C.P. Eaton Partners1. You just opened of a representative office in Shanghai for placement agent C.P. Eaton Partners and will spend at least half your time or more in Asia. Why the move to Asia?
This isn’t a new effort. I’ve lived on a plane. We’ve represented several Asian funds, most recently the Asian fund of funds of Partners Group. We did Capital Today, a China growth equity fund, and we also did fund of funds Asia Alternatives [which targets mostly Asia-based growth and buyout funds]. We really believe that this is a long-term opportunity for alternative investments. We’re taking a 15-to-20-year perspective. The opportunity includes all asset classes, from real estate to hedge funds to buyouts to distressed. There’s been a lot of time and effort put in over the last three years, and we think we’re one of the first movers in our segment in terms of placement agents.
2. What’s the LP base in Asia like?
It’s just beginning to accelerate and will develop over the next five years. LPs span the region from Australian pension funds, to Singapore, to Japan, to Hong Kong, to China. You used to think about Asia from a private equity standpoint as about the size of New England. There were only a handful of managers and the LP community was limited to about four or five people. The velocity of change here is extraordinary.
3. By one estimate, there recently were 29 private equity firms with offices in Beijing and 26 with offices in Shanghai. What is the GP community like?
Five years ago the pan-Asian funds were the only way to play Asia. Now you have funds of funds coming into the region. You have growth equity, buyout, distressed. The next stage will be sector funds. There’s been some TMT [telecommunications, media and technology] funds recently and a couple of health care funds. We’re starting to see the evolution of a fully functioning private equity community. We’re probably 60 percent to 70 percent there.
4. What kind of GP makes the trip to Asia to raise capital? What’s that trip like?
First, there has to be a foundation of interest. We’re not just going to go over there and prospect. Any manager who makes a trip will be highly qualified. But we’ll put together a trip of the whole region once there are indications of interest on the GP and LP side. It would definitely be regional and not country-specific. Maybe 10 to 20 meetings.
5. What are your thoughts on the Blackstone sale of a $3 billion stake to the government of China?
I was as surprised as everyone else was. But I’m not surprised at the Chinese government thinking in a more progressive way than people estimate. They don’t always do everything right, but the direction of their thinking has been phenomenal. I think it’s a loud signal that they are open to international investment. I think Blackstone saw it as an opportunity to send a clear message to the world that China is a good place to do business. It makes you sit up and think, “Maybe you can do business in China.” That’s the message from both Blackstone and China.