| HKVCA Dinner with HK Chief Justice | | | The HKVCA hosted its special dinner with the Hong Kong Chief Justice on the evening of Monday, 18 April. While the event was something of a departure for the Association, it attracted over 40 industry practitioners and professionals. We received extremely positive feedback regarding the Chief Justice’s thought-provoking speech on the fundamental principles that underlie both the rule of law and Hong Kong’s Basic Law - principles which serve to ensure that our judiciary remains independent and transparent. As we are all aware, the successful maintenance of this system, at a time when Hong Kong’s political and civil life has become politicized and fractious, is a considerable responsibility and what we heard from the Chief Justice gave cause for optimism that the system is indeed in good hands.
At a time when the so-called “Panama papers” are exposing issues related to offshore centers, there is opportunity for Hong Kong to enhance its position as an open economy for trade and investment, bringing funds onshore, and leading to worthwhile job creation in our small sector. Yet initiatives such as these only work if there is confidence in Hong Kong’s legal system and the belief that it will continue to be based on the rule of law and independence of the judiciary.
The HKVCA would like to thank our Vice Chairman, John Levack, and Joseph Ferrigno for serving as the evening’s hosts. The Association is honored that the Chief Justice took time from his busy schedule to join us for this important event. We of course also thank all the participants who helped to make this evening a tremendous success.
|  | Despite the recent extreme volatility in the equity markets, Fred Hu notes that the level of activity from fund-raising to realizations in Asia Pacific was on par last year with the historical average, leaving the industry with no doubt about its value to investors | | | In the news because of his company’s recent investment in Ant Financial, which owns Mainland China’s PayPal rival Alipay, Dr Fred Hu is the Chairman and CEO of Primavera Capital Group, the Greater China-based private equity firm he founded after a 13-year career as partner and chairman of Greater China at Goldman Sachs.
Instrumental in building Goldman's franchise in the region, Hu led some of the largest and most significant transactions in its history. He is a respected economist whose main areas of research interest include macroeconomics, international finance and capital markets. He served at the International Monetary Fund, and has advised the Chinese central government on financial reform, SOE restructuring, and macroeconomic policies.
Primavera has offices in Beijing and Hong Kong, from which it manages both RMB and USD funds for leading institutions, corporations, and families in Mainland China and around the world. Hu points to Hong Kong’s unique advantages in human capital, the critical mass of private equity and venture capital firms, low tax rate, predictable legal and regulatory environment and its proximity to Mainland China – the region’s biggest private equity and venture capital market – as key to Hong Kong’s success.
As a prominent investor Hu is well placed to observe its economic development and the growth of its technology and service sectors. One topic that he spoke to the HKVCA about was devaluation of the RMB, which he said has been “both measured and modest”. Nonetheless, he highlights the new risk for US dollar denominated funds investing in Mainland China as well as on Chinese outward investment.
“The floating exchange rate regime creates a different risk profile compared to a fixed exchange regime. Now you have to worry about the new dimension of risk, namely the currency risk. Fortunately, private equity is a long-term asset class so you have enough time to position yourself to mitigate whatever the currency risk is for your portfolio,” he said.
“That mitigation comes both through the portfolio companies and the fund managers hedging the exchange rate risk. In terms of the business mix and asset liability matching, the most fundamental is the portfolio company. For example, if you are a strong believer in the weakness of the yuan over the medium term, then it is not advisable that you have large dollar liabilities, in other words, dollar denominated borrowing. And if you do, then you need to make sure you are in a position to hedge. So I think what a portfolio company does is really critical to currency risk management.”
Notwithstanding currency risk, Hu is optimistic about investment opportunities for private equity in Mainland China in the coming years. While 2015 was a volatile year because of the stock market crash and failed attempts at market intervention that sent shockwaves worldwide, the private equity industry in Asia Pacific actually posted one of its strongest years on record. According to Bain & Company’s Asia-Pacific Private Equity Report 2016, deal value spiked to US$125 billion, soaring past 2014’s previous record high. Exit activity, at US$88 billion, remained robust despite the extreme volatility in the equity markets. Fund-raising was on par with the historical average. And the industry left no doubt about its value to investors: returns from past investments grew across the region, extending the momentum begun in 2014. Limited partners were cash positive for the second year in a row as general partners found ways to return capital with improving returns.
“This strength was a function of Mainland China’s large economic size, deregulation, consolidation, growth of its tech industry, and so forth. I am optimistic about the medium term opportunities there, but as to which sectors are most attractive depends on individual strategies, capabilities and core competencies. I like the service sectors such as education, healthcare and retail financial services. They are sectors that are presently underdeveloped and thus there is more potential for expansion and more scope for coming up with unique business models and technology, and therefore, value creation,” Hu said.
A large focus of the Chinese government, and one that may drive opportunities for private equity in future, is the “One Belt, One Road” development strategy and framework proposed by Chinese leader Xi Jinping. Focusing on connectivity and cooperation among countries primarily between China and Eurasia, it consists of two main components; the land-based Silk Road and the oceangoing Maritime Silk Road. The strategy underlines Mainland China’s push to take a bigger role in global affairs and its need to export production capacity in areas of overproduction such as steel manufacturing.
Hu calls it a grand design, a national strategic initiative and a vision for the long term. “As an industry we have to stay on top of it and watch and monitor the developments closely so we can see the emerging opportunities. I think there will be cross-border opportunities – cross-border investments through teaming up with strategic players, private equity firms coming together to do deals in new markets, and so forth. I think it will definitely be a new stream of opportunity,” he concluded.
| | _ |  |  | | | | Sponsored by |  | | Speakers: | Makota Takada, General Counsel, Advantage Partners | | Yuka Matsuda, Tax Partner, Financial Services, | | PricewaterhouseCoopers Japan | | Date: | 9 May, 2016 (Mon) | | Time: | 12:15 - 14:00 | | Venue: | The China Club, 14/F, The Old Bank of China Building, | | Bank Street, Central, Hong Kong | | Fee*: | Full Member (Corporate): one free pass per company | | *Note, free pass no shows will be charged full price | | Full Member (Additional Pass)/ Associate Member: | | HK$450 per person | | Non-member: HK$800 per person | | *An additional charge may apply to accommodate special dietary requests | | CPT: | 1 point | | | | |
 | | The 15th HKVCA China Private Equity Summit 2016 |  | | Date: | 30 May, 2016 (Mon) | | Time: | 9:00 - 17:15 (followed by cocktail reception) | | Venue: | N201, Hong Kong Convention and Exhibition Centre | | (New Wing) | | Fee: | Full Member (Corporate): one free pass per company | | Full Member (Additional Pass)/ Associate Member: | | HK$4,100 per person | | Non Member: HK$6,100 | | CPT: | 6.5 points | | Simultaneous interpretation (English and Mandarin) services will be provided, except for Stream B sessions. | | | View CPES 2015 highlights here. |  
| | HKVCA Members Event |  | | |
Sponsored by |  | | Date: | 3 June, 2016 (Fri) | | Time: | 8:00-9:00 | | Venue: | Victoria Suite, Hong Kong Club, 1 Jackson Road, Central, HK | | (Room reserved under the name of Mr. Johnny Chan) | | Fee*: | Full Member (Corporate): one free pass per company | | *Note, free pass no shows will be charged full price | | Associate member/ Full Member (additional pass): HK$280 | | *An additional charge may apply to accommodate special dietary requests. | |
| | | | | Sponsored by |  | | Speaker: | James Grove, Head of Asian Operations, Preqin | | Date: | 6 June, 2016 (Mon) | | Time: | 12:15 - 14:00 | | Venue: | The China Club, 14/F, The Old Bank of China Building, | | Bank Street, Central, Hong Kong | | Fee*: | Full Member (Corporate): one free pass per company | | *Note, free pass no shows will be charged full price | | Full Member (Additional Pass)/ Associate Member: | | HK$450 per person | | Non Member: HK$800 per person | | *An additional charge may apply to accommodate special dietary requests | | CPT: | 1 point | |
| | | | Sponsored by |   | | | Theme: | A saucy affair... | | Date: | 13 June, 2016 (Mon) | | Time: | 18:30 - 20:30 | | Venue: | Harcourt Suite, Hong Kong Club, 1 Jackson Road, | | Central, Hong Kong | | (Room reserved and hosted by the name of Mr. Marcus Thompson) | | Fee: | Early Bird Rate (Payment before 13 May, 2016) | | HKVCA Member: HK$600 per person (HK$680) | | Non Member: HK$1,000 per person (HK$1,200) | | | Priority is given to HKVCA members. | | | | Instructed by Debra Meiburg, Master of Wine | | | |
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HKVCA Supporting Events:
IFC’s 18th Annual Global Private Equity Conference In Association With EMPEA
9-12 May 2016
HKTDC Entrepreneur Day 2016 - Fund & Mentor Session
13 May 2016
Belt and Road Summit 2016
18 May 2016
AVPN Conference 2016
23-25 May 2016
FT Half Day Workshop: So You Want To Be A Non-Executive Director?
26 May 2016
FINNOASIA - A FinTech Seminar
30 May 2016
APAC Innovation Summit 2016 - Robotics
2-3 June 2016 | | | . | |
New Members Welcome
Corporate Full Members
GE Ventures
GE Ventures identifies, scales and accelerates ideas that will help make the world work better. Focused on the areas of software, advanced manufacturing, energy and healthcare, GE Ventures combines equity investing, new business creation, licensing and technology transfer to deliver an innovation platform designed to drive growth for partners and GE.
Maison Capital
Maison Capital is a private equity firm that specializes in early to growth stage investment in lifestyle, services and consumer oriented technologies. Since our establishment in 2004, we have successfully invested in numerous market leaders and grown together with these companies over the decade.
Corporate Associate Members
Jardine Lloyd Thompson Limited
Jardine Lloyd Thompson (JLT) Asia is a market leader in insurance and reinsurance broking, risk management consultancy and employee benefits services. Our operations in Asia date back to 1836. Today, JLT Asia is one of the most experienced brokers in Asia, with over 1,700 staff in 13 territories. JLT Asia’s technical abilities and expertise span a wide range of specialist areas. Our quality and compliance regimes are among the most thorough in the industry.
Nardello & Co.
Nardello & Co. is a global investigations firm with experienced professionals handling a broad range of issues, including the FCPA/UK Bribery Act and other corruption-related investigations, civil and white collar criminal litigation support, asset tracing, strategic intelligence and political risk assessment, computer forensics, reputational due diligence, domestic violence and sexual assault compliance and investigations.
Norton Rose Fulbright Hong Kong
Norton Rose Fulbright is a global law firm. We provide the world’s pre-eminent corporations and financial institutions with a full business law service. We have 3,800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia. Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
Overseas Associate Member
Milestone International Tax Partners LLP
Milestone International Tax Partners LLP is a boutique international direct tax practice based in London, Dublin and Hong Kong. We advise owner managed businesses, high net worth individuals and SME multi-national businesses on cross-border tax issues. Our corporate clients include investment funds, hedge funds, private equity and VCs as well as their managers and advisers.
Recent Events Report
HKVCA Breakfast Meeting
6 May 2016
The HKVCA’s monthly breakfast meeting was held at the Hong Kong Club on Friday, May 6, hosted by our Chairman, Eric Mason. The event was substantially oversubscribed and, as has been the case in previous months, proved to be an extremely popular activity for our members. Close to 70 persons attended and were able to take advantage of this valuable opportunity for networking and a chance to reconnect with fellow industry practitioners. We would like to thank each of our members for their enthusiastic participation, helping make this regular event such a success.
HKVCA Luncheon Talk - Outbound Investments into Europe
29 April 2016
A luncheon talk, sponsored by European law firms Chiomenti; Cuatrecasas Goncalves Pereira; Gide Loyrette Nouel; and Gleiss Lutz Hootz Hirsch, was held on April 29, 2016 at the China Club. Representatives from each of the firms spoke on the very timely subject of the growth in outbound investment into Europe. The expert speakers were Giulia Battaglia from Chiomenti; Pedro Amat Mendez from Cuatrecasas Goncalves Pereira; Antoine de la Gatinais from Gide Loyrette Nouel; and Michael Burian from Gleiss Lutz Hootz Hirsch, and the moderator was William Hay from Baring Private Equity Asia.
The discussion covered the key issues private equity players needed to consider when approaching European counterparties and structuring, negotiating and executing investments in European target businesses. They also shared with the audience their own experiences, highlighting how they had successfully helped private equity players acquire European businesses and the various resulting challenges they had encountered.
We would like to thank our extremely knowledgeable speakers as well as our sponsors without whom this most successful event would not have been possible.
HKVCA YP Mixer
21 April 2016
A Young Professional Mixer was held on April 21, 2016 at the Topiary Bar in Lan Kwai Fong. This regular networking event, which is aimed specifically at our younger professionals, attracted over 50 participants from the private equity and venture capital industries.
HKVCA Brownbag Luncheon Talk - Identifying and Mitigating Risk
21 April 2016
A brownbag luncheon talk with speakers from FTI was held on 21 April 2016 at FTI's Hong Kong office. The talk was titled "Identifying and Mitigating Risk: Conducting Effective Due Diligence in Asia". Greg Hallahan shared his experiences on identifying and reviewing notable warning signs and offered guidance on how investors can protect themselves from risks that may not be apparent from financial due diligence alone. He also focused on investment risk associated with bribery, corruption and fraud, and highlighted a number of practical due diligence methods and resources for mitigating risk from a range of actual case studies. We would like to thank Greg Hallahan and offer a very special thanks to our sponsor, FTI Consulting, whose support made the event possible.
Industry News
Draper Fisher Jurvetson sells nearly entire India portfolio to NewQuest Capital Partners
3 May 2016
(ETtech by Madhav Chanchani) - Experts said such secondary sales are bound to increase as venture capital and private equity firms approaching ends of their typical 7-10-year investment cycles scramble to sell holdings.
Draper Fisher Jurvetson (DFJ), an investor in Elon Musk's electric-car company Tesla and spacecraft maker SpaceX, has sold nearly its entire India portfolio to NewQuest Capital Partners, inching closer to ending a three-year hunt for buyers.
View full article here
CDIB Capital Invests in Leading IT-Driven Integrated Logistics Company in China
3 May 2016
(Press Release) - CDIB Capital is pleased to announce that it closed, together with its co-investors, a US$45 million investment in Best Logistics Technologies Limited (“Best Logistics”), a leading IT-driven integrated logistics and supply chain management service provider in China.
Established in 2007, Best Logistics has become one of the few industries players that provide customers with a full range of logistic services – from express and freight to integrated supply chain management. The Company has an extensive nationwide coverage in China. The ecosystem is supported by sophisticated IT capabilities and an asset-light operating model, which are key competitive advantages of Best Logistics.
View full article here
Hong Kong Monetary Authority doubles alternatives commitments in 2015
30 April 2016
(AVCJ by Tim Burroughs) - The Hong Kong Monetary Authority (HKMA) made new or approved private equity and real estate commitments of $9.7 billion in 2015, double the previous year’s allocation.
The territory's reserves are held in the HK$3.42 trillion ($441 billion) Exchange Fund, which is tasked with affecting the exchange value of the Hong Kong dollar in order to maintain monetary and financial system stability. Investments in illiquid alternatives are made from the long-term growth portfolio (LTGP), which was worth HK$142.1 billion at the end of 2015, up from HK$115.2 billion 12 months earlier.
View full article here
Hong Kong: Caterspot secures $800k seed investment
19 April 2016
(DealStreetAsia by Shiwen Yap) - Hong Kong-based Caterspot, an online catering platform, has secured $800,000 in a seed round led by Singapore-based Triplestar Capital and participation from Swiss Founders Fund. According to an offical statement, the funds will be used to accelerate growth in Singapore and hong Kong, fund key hires and speed up product development.
Founded in January 2016, the online marketplace which is headquartered in Hong Kong and maintains an office in Singapore connects companies and people with local catering options, the venture offers users the possibility to order over 1000 catering menus online from a curated list of caterers and restaurants.
View full article here
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