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May 28, 2008

Interview with Squadron Capital CEO

AltAssets has an interesting interview with David G Pierce, CEO of Asia-focused Private Equity Fund of Funds Squadron Capital.

On the firm's due diligence process:

The private equity industry in the Asia Pacific region has seen enormous growth in a relatively short space of time, as have most of the economies in which we invest. We, of course, look deeply at return information, but it is important, especially in countries like China and India that have seen such rapid growth, to determine whether an investment involved true value creation by the general partner or is just a case of "the rising tide lifting all boats".

...Track record is very important for us, but the reality in Asia is that track records are often very brief. We also look at the quality of the team, the quality of the structure, their skill set and whether they conform to global best practice. Essentially, we look at whether their fund aligns the interests of the general partner, its team and the fund's investors.

Challenges facing the private equity industry:
We are seeing a lot of new entrants, with lots of new investors attracted to private equity and the returns it can bring. There is significantly more money coming into private equity, and the asset class has to learn how to cope with large investors increasing allocations. With some of the largest, even an increase of a few per cent is still in the hundreds of millions. The industry needs to seek new markets in which to grow; Asia would be a good example. The issue is how to handle this growth and continue to make good investments.'

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.