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Alternative fund structures: Alternate universe

Wednesday, October 14, 2020

(AVCJ by Justin Niessner) - Asian private equity appears to be on the cusp of a practical shift in terms of its widely
adopted protocols for structuring investments. Unfortunately, the improvement may be more motivated by desperation than enlightenment.

Fund formation professionals are observing an evolution whereby GPs are more open to modifications of traditional limited partnership structures and LPs are more demanding of them. In the long term, this can be charted in the rise of co-investment and continuation funds that expand optionality around extended holding periods. In the more immediate term, the trend has been colored by strong growth in evergreen funds, club deals, listed deal-by-deal structures, special purpose and single-mandate vehicles, and fund-of-one platforms.

The US has been the leading jurisdiction for these changes thanks to the depth of the domestic private equity industry and its sheer scale; a larger population of multi-strategy GPs has proven conducive to proactive and creative fundraising. The wave has not come to Asia, but it will soon. This is perhaps especially true for China, where alternative GP-LP structures have already gained significant traction, and Southeast Asia, where investor demand for these strategies is highest and intraregional economic treaties could accelerat proliferation.


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