GQG emerges as pandemic winner with $30bn asset growth

The investment firm set up by former Vontobel star manager Rajiv Jain has more than doubled its assets to $62bn this year, making it one of the standout winners in the fund management sector from the coronavirus crisis.

GQG Partners, which was set up by India-born Mr Jain in 2016 and which manages funds focused on emerging markets, US and global equities, had net client inflows of $18.2bn in the first nine months of this year, the Florida-based firm told the Financial Times.

Read the FT’s latest coverage on GQG here:

Carsome Announces Series D Fundraising led by Asia Partners

Capital to accelerate regional expansion of Southeast Asia’s largest integrated e-commerce platform for cars

KUALA LUMPUR, JAKARTA, BANGKOK & SINGAPORE, 8 December 2020:

Carsome, Southeast Asia’s largest integrated car e-commerce platform, recently completed its Series D fundraising. The US$30 million round, one of the largest all-equity financings to-date in Southeast Asia’s online automotive industry, was led by Asia Partners and was joined by existing Carsome investors Burda Principal Investments and Ondine Capital.

According to Eric Cheng, Co-founder and Group CEO of Carsome, this fundraising round, the largest equity investment in Carsome’s history, is a strong endorsement of its integrated business model, with end-to-end digital enablement across used car sellers, dealers, and buyers. “We will use this capital to strengthen our existing regional leadership in consumer-to-business (C2B) used car e-commerce and accelerate our already successful new offering in the business-to-consumer (B2C) segment. We look forward to rolling out Southeast Asia’s first-ever C2B and B2C integrated e-commerce platform for used cars, a significantly superior new retail experience,” said Cheng.

“Over the past six months, we have doubled our monthly revenue compared to pre-pandemic levels, a dramatic acceleration due to the impact of the ongoing Covid-19 pandemic on consumer behavior across our region,” Cheng added. “Consumers across our core markets of Malaysia, Indonesia, Thailand, and Singapore are increasingly purchasing cars to keep their families safe and adapt their businesses.”

Commenting on the fundraising, lead investor Oliver M. Rippel of Asia Partners observed that Carsome’s combination of strong executive leadership and a robust business model position the company well for future growth. “Carsome’s integrated approach offering a one-stop solution to used car buyers and sellers is genuinely impressive. We see that this will be the way forward for the used car industry, and we look forward to working closely with Eric and his very capable team in further scaling the business across the region.”

Founded in 2015, Carsome has grown to employ more than 1,000 people and today transacts an annualized 70,000 cars totalling US$600 million in transacted value on its online platform. Building on its original foundation in Malaysia, one of Southeast Asia’s largest car markets, Carsome then launched its operations in Singapore, Indonesia and Thailand, deepening its regional footprint.

Since founding, Carsome has delivered an impressive record of accomplishments, growing from strength to strength. Carsome recorded its highest revenue quarter in Q3 2020 in its history, doubling its revenue from the pre-pandemic period. In November 2020, Carsome celebrated its 100,000th car sold through its platform – an important milestone achieved within five years of founding.

Notably, Carsome has also achieved operational profitability as of October, ahead of earlier projections. “We have built a defensible, scalable, and profitable business with very healthy unit economics attributed to both growth in gross margin and steady improvements in productivity and conversion metrics,” said Juliet Zhu, Carsome Group Chief Financial Officer. “Our Series D round will further support potential merger and acquisition opportunities in acquiring ancillary capabilities and consolidating our supply chain.”

Crucial to Carsome’s success has been its commitment to rigorous car inspections, offering Carsome-inspected and certified cars directly to customers in a seamless fashion, building a reservoir of consumer trust and brand equity in an essential but historically complex industry. Every car that transacts on the Carsome platform goes through a comprehensive 175-point inspection, and every Carsome car purchase is backed up with an extended warranty and a money back guarantee.

Carsome’s successful track record of digitizing a traditionally offline and fragmented industry, as well as its resilience in the face of the global pandemic, were key factors in several existing investors’ decisions to reinvest in the Series D round. “We appreciate the way Carsome has continued to support car sellers and dealers through the pandemic,” said Albert Shyy, the Singapore-based Managing Director of Asia for Burda Principal Investments, who first invested in the Series B round. “We witnessed Carsome’s growth and resilience during the pandemic and are proud to continue our support,” added Randolph Hsu, the Taipei-based Founding Partner of Ondine Capital, who first invested in the Series C round.

While the platform flourishes from digitalization tailwinds, Carsome remains focused on supporting its partners to navigate new challenges brought about by the pandemic. Carsome introduced various incentives and bonus rewards for used car dealers in Malaysia, Indonesia and Thailand under its Dealer Alliance Support Program. The company also introduced its Covid-19 Support Fund this year for employees affected by the pandemic.

Coverage in the FT: Online used car sales fuel Asia fundraising burst

Rajiv Jain: The Gravity of the Growth/Value Debate

An opinion piece from our partner GQG in Funds Europe.

The value or growth framework is "overly simplistic", says Rajiv Jain, chairman and CIO of GQG Partners. While avoiding "value traps" is critical to long-term returns, some in the growth camp "have gotten a bit ahead of themselves".

History has taught us many lessons but uncovering those lessons is easier said than done. Under trying circumstances such as our current environment, it’s often difficult to carry a prudent optimism. But what if history shows us that human progress can push forward despite our less than ideal current conditions? Let us explain.

During the Great Plague in 1665, many people made a rush out of the cities to retreat to the countryside (not unlike 2020 where not a day goes by that a story isn’t published about a rush out of cities and an embracing of suburban or rural life). One such person retreating to the outskirts during this period of turmoil was none other than Sir Isaac Newton. During this period of quarantine and exodus, Newton made great strides in not only what would ultimately become known as calculus, but also this very small thing involving an apple and ultimately what keeps us glued to the ground – gravity. In hindsight, and driven by Newton’s insights, this particular quarantine earned the moniker annus mirabilis – the year of wonders.

In our current environment, and while not as extraordinary as calculus, but still quite extraordinary, is something that we’re all readily accustomed to at this point – virtual everything.

Just six months ago, this interconnected global system of virtual meetings, events, etc. was almost entirely inconceivable, at scale. The teleconference, while not new and arguably if not for our current circumstances, would have remained relegated to quick meetings squeezed in between the really important ones or simply saying “hello” to family members abroad.

Overly simplistic

So like Newton, a reframing of the environment, even if under less than ideal circumstances, can bear great fruit (pun intended). The goal, of course, is to recognize those opportunities before others do, a proposition much easier said than done. Therefore, to do this, the industry often uses an overly simplistic framework, one of value or growth.

Value: purchasing securities that are “cheap” based on some metric such as low price to book or low price to earnings. The value factor has been recently maligned but historically revered due to its somewhat intuitive formulation combined with academic citation rings on its efficacy.

Contrast this with the historical underdog, “growth” which is rooted in optimism about the future and based on metrics such as above average revenue and earnings per share growth. While not nearly as academically sound as its value foil, growth has been favored by investors for more than a decade due to a perceived “growth scarcity” as well as the prevalence of companies with strong network effects, which has seen growth strategies and indexes accrue relative gains over value.

Because of this decade long phenomenon, much like the urban exodus articles noted above, not a day goes by that some publication doesn’t run with a story from one camp, explaining their plight with religious zeal, in defense of one “factor” versus the other. While we think there’s nothing wrong with being religious in your personal life, we believe a more agnostic approach to investing is worth pursuing.

GQG Partners’ is not one of value nor growth, we’re simply focused on compounding and teasing out a process that works. Having said that, we do believe a company needs to be growing in order to be worth the work as we believe avoiding value traps is critical to long term returns. But we also think that areas of the market, particularly in the high growth camp, those that have directly benefited from the current virtual revolution or those that are perceived as “revolutionizing the planet” in some other way have gotten a bit ahead of themselves.

We think this is especially true for those “revolutionary” companies that have not produced cash flows commensurate with their recent price appreciation or have come to market under the newfound gusto for blank check companies. Why such caution? Because as students of history, we’ve seen this before.

Much like the speculative fervor that was produced in the decades following Newton’s annus mirabilis, we think investors in certain areas would benefit from recalling the words of Thomas Babington Macaulay, describing the high growth investors of his time as having “an impatience to be rich, a contempt for those slow but sure gains which are the proper reward of industry, patience and thrift".

While it’s not always easy to resist the push and pull of either camp, agnostic we shall remain, solely focused on identifying opportunities wherever they exist, most likely due to the distractions caused by the battles between our more zealous style-box focused peers.

FT Interview: Lessons learnt from a career of investing through crises.

Rajiv Jain is used to a crisis. The founder of boutique GQG Partners made his name as a star emerging markets trader during a long career at Vontobel Asset Management.

Read the FT’s latest interview with Rajiv here:

The State of European Tech from Atomico - The most comprehensive data-driven analysis of European technology

We are delighted to highlight the single, most comprehensive data-driven analysis on European technology today, produced by Atomico in partnership with Slush and Orrick.

Find the report here: https://2019.stateofeuropeantech.com/

Private Equity: Looking at Southeast Asia’s promising tech businesses

The last few years have seen Southeast Asia become a major focal point for private investment dollars. With the region’s 600 million-strong population and fast-growing middle class, its consumer market is the latest battleground for businesses looking to grow. Investment dollars have poured into the region, seeking large unicorns and even larger returns.

Looking ahead, Southeast Asia’s growing influence as a consumer market will give rise to a slew of technology-focused companies, many of which have the potential to hit billion-dollar status. In fact, Singapore-based private equity firm Asia Partner’s proprietary models suggest that the region’s tech ecosystem will see the emergence of many unicorns in the next 10 years.

“We are tremendously optimistic that there will be 20 more billion-dollar companies in the region over the next decade. Our projections mirror the findings of Bain & Co, which forecasts that 10 such companies will emerge over the next five years,” says the firm’s co-founder Nick Nash.

In fact, he and co-founder Oliver Rippel see China’s all-conquering consumer market (and the tech giants that have risen as a result) as a compelling proxy for the investment thesis that they are running in Southeast Asia. The firm focuses on growth equity in the region’s technology space.

To this end, the co-founders are bullish on tech-focused marketplace businesses that cater for Southeast Asia’s burgeoning consumer base. “We look at e-commerce businesses in the travel vertical. We also look at online car and real estate classifieds. We have seen a lot of offerings pop up in Southeast Asia for cars and even motorcycles, for example. Other than that, online education, healthcare technology and financial technology are all verticals that we look at,” says Nash.

Technology and business have become so intertwined in the last decade that the strict business-to-business (B2B) or business-to-consumer (B2C) delineations do not always apply to this new generation of tech companies such as online marketplaces.

Rippel explains, “We live in a world where the lines between these old descriptors [B2B and B2C models] are blurring. The very definition of the new marketplace business is that it links a broad group of suppliers with a broad group of consumers. In fact, these marketplaces serve both end-users and businesses that ultimately want to reach the consumer.”

The duo believe that their investment thesis is sound as their research has tracked compelling similarities between the evolutionary phases of the Chinese technology landscape and that of Southeast Asia’s. Evolving right alongside China’s technology is the country’s one billion-plus population. As it becomes more prosperous, its consumers will become an increasingly attractive market to sell to. Over the last 10 years or so, a number of Chinese billion-dollar tech giants have emerged to serve this population.

Rippel says China’s consumer market took its economy through four distinct evolutionary phases and that Southeast Asia is mirroring that evolution. “Looking back at the last two decades, China went through four distinct phases before it became the thriving technology ecosystem that it is today.”

The first of these phases was the development and widespread adoption of telecommunications infrastructure, or what he refers to as basic plumbing of the tech world. Next, came the so-called Internet 1.0, which saw the emergence of very large, mainly horizontal, consumer-driven e-commerce platforms.

“These broad-based e-commerce platforms covered everything from fashion to electronics. Examples include Amazon.com, eBay, Alibaba Group Holding and JD.com,” says Rippel.

Later on, within the e-commerce space, there was a shift away from the broad-based selling platforms, says Nash. As that generalist e-commerce space began to saturate, businesses evolved to develop e-commerce niches of their own.

“We started to see the emergence of specialised e-commerce platforms catering for just one particular segment. For example, fashion platforms have become very popular. Their interfaces are specifically catered to optimise the fashion shopping experience. In addition, these platforms go very deeply into the unique fashion supply chain for the benefit of fashion merchants,” he says.

This was the third evolutionary phase and one that China moved out of in the last few years.

According to Nash, China is currently in the fourth evolutionary phase. “We commonly refer to it as the online-to-offline (O2O) model. We are starting to see the emergence of omni-channel platforms that cover both the online and offline realms,” he says.

Last year, Chinese tech giant Alibaba opened a slew of supermarkets that use the O2O model. Founded in 2015, Hema has opened 150 stores across 21 cities in China, according to a June news report by Caixin.

It is possible for customers to purchase raw produce, have it delivered to on-site kitchen staff for cooking and then have the food ready for them at a designated dining area. The entire series of transactions take place via Alibaba’s payment app.

Nash says the pattern of initial public offerings (IPOs) by Chinese companies, broken down by sector, between 1995 and 2019 corresponds quite precisely to these four stages of industry evolution. “I would suggest that China is 11 years ahead of Southeast Asia in terms of affluence [based on per capita GDP]. Combining these ideas, it will not be surprising if Southeast Asia’s technology ecosystem is about 11 years behind that of China, as measured by the timeline of the IPOs.”

Successful exits

The two co-founders have unique credentials when it comes to identifying and building multibillion-dollar tech companies. Prior to joining forces, Nash and Rippel oversaw two successful exits in Asia ex-China — the 2017 New York Stock Exchange IPO of Southeast Asian technology giant Sea Ltd and the 2018 Walmart Inc acquisition of Indian e-commerce giant Flipkart respectively.

Nash joined Sea (formerly known as Garena) from one of the company’s earlier investors, General Atlantic, in 2014. Singapore-based Sea is a diversified Southeast Asian tech company that owns and manages online gaming platform Garena, e-commerce player Shopee and e-wallet provider AirPay.

Nash was appointed group president of Sea and he led the company to its listing on the New York Stock Exchange in October 2017. The IPO, which raised US$884 million, remains the largest ever for a Southeast Asian internet company. It had achieved an internal rate of return (IRR) of 67.7% as at end-July. Year to date, the stock is up nearly 177%.

An Asian-American, Nash moved to Singapore in 2011 to work with US investment firm General Atlantic. As principal and head of Southeast Asia, he opened and led its Singapore operations that year. “After making our first investment in the company that is now Sea, I ‘retired’ from General Atlantic and joined Sea as group president.”

Nash co-led the business alongside Sea founder and group CEO Forrest Li, overseeing the company’s region-wide expansion, the launch of Shopee and the eventual IPO. “I was intimately involved in leading the IPO journey which, very happily, turned out to be a major success for investors. We went public at US$15. The stock is now trading in excess of US$29.”

The counter was trading at US30.55 on Nov 6.

Rippel is a veteran of the Asian B2C investment space. Prior to co-founding Asia Partners, he was CEO of B2C e-commerce at Naspers, a large South Africa-based global technology investor. “Naspers is notable for being the largest shareholder (32%) of Chinese tech giant Tencent Holdings Ltd,” he tells Personal Wealth.

While at Naspers, Rippel was one of the early investors of Indian e-commerce giant Flipkart. He initiated the investment, served on its board and then brokered the eventual sale to US retail giant Walmart Inc at a massive US$21 billion valuation. The sale garnered a return on capital of 3.6 times, resulting in a net gain of US$1.6 billion for Naspers, on the back of an initial investment of US$600 million. “The Flipkart exit got Naspers an estimated IRR of 29%,” he says.

Rippel also spent almost nine years with eBay in various regional leadership positions.

Nash and Rippel have known each other since 2011 as they both came to Singapore around that time. In fact, they were already acquainted because Naspers was an indirect shareholder of Sea (Naspers is a major shareholder of Tencent which, in turn, is a major shareholder of Sea). “We have exchanged thoughts on consumer technology in emerging markets and Southeast Asia for a long time,” says Rippel.

Fresh off their highly successful exits, Nash and Rippel did what they saw as the natural progression for themselves — joining forces and setting up Asia Partners with three other friends; a Thai, an Indonesian and a Vietnamese.

Travel theme a strong pull

Perhaps unsurprisingly, Asia Partners’ maiden investment is indicative of the co-founders’ belief in Southeast Asia’s influence as a consumer market. In mid-August, the firm led a Series C funding round for Singapore-based budget hotel booking company RedDoorz. According to its website, RedDoorz has more than 1,000 properties across Southeast Asia.

According to Crunchbase, the funding round netted RedDoorz US$70 million, although Asia Partners declined to specify the size of its investment. RedDoorz has raised US$134.4 million to date.

The start-up is a customised platform catering for budget travellers in Southeast Asia. “RedDoorz focuses on budget hotel offerings and provides a very specialised solution for travellers as well as property owners,” says Nash.

Incidentally, per the co-founders’ views on the emergence of more Southeast Asian unicorns, they believe RedDoorz is well on its way to billion-dollar status.

The budget travel sector is a multibillion-dollar market, with hundreds of thousands of budget hotels across the region, says Rippel. “This is currently a very fragmented marketplace. The one and two-star budget hotels are often managed directly by the property owner, who probably has one or two small properties. These hotels tend to have varying levels of quality and service and face the big issue of low occupancy rates. RedDoorz increases occupancy rates for hotel owners by helping them professionalise and standardise some of their offerings.”

But the company faces a number of potential challenges to its growth. It is competing against a SoftBank-backed unicorn in the budget travel sector. Known as OYO, the India-based company has branched out to a multitude of global locations in recent years. According to media reports citing 25-year-old founder and CEO Ritesh Agarwal, OYO operates in more than 80 markets globally and manages more than 1.2 million rooms. As at July, the company was valued at US$10 billion, according to TechCrunch.

Nash and Rippel remain confident in RedDoorz’ prospects for a number of reasons. Among others, the hospitality business is not a classic “winner takes all” kind of market. “The hotel business is a multiplayer and often, a multi-winner sort of market. Our research on this theme found that there were very few players operating in RedDoorz’ space. And yes, one of those companies is OYO,” says Nash.

He adds that they believe the business of online marketing and distribution of budget hotels is fundamentally a local, rather than global, business.

On a broader scale, their research led them to conclude that technology businesses fall into three core categories — the global network effect, unique local winners and the local network effect. It is a central tenet of their investment approach, one that they say is incredibly predictive.

Companies in the first category include Alphabet Inc’s Google, Facebook Inc, Amazon Web Services and Microsoft. Unique local winners include Chinese search engine giant Baidu. And the third category includes Alibaba, Grab, Gojek and RedDoorz. The vast majority of emerging market tech companies are concentrated in the third category.

The model, among others, explains why the likes of Grab and Gojek outcompeted Uber in Southeast Asia, despite the latter raising much more capital globally. Uber, itself a beneficiary of the local network effect, albeit in its home region of the US and other Western markets, entered Southeast Asia without an appreciation for various hyperlocal customs.

For example, Gojek ran ahead of Uber in Indonesia because the former understood the latent demand for motorcycle riders to ferry passengers around. Gojek brought these services to market much earlier than Uber.

As for Malaysia’s Grab, it understood very quickly how Malaysians preferred to pay cash and thus, provided that as a payment option. Uber only followed suit much later during its short lifespan in the country.

Simply put, these locally founded companies had a better understanding of their immediate surroundings than other, much bigger and well-funded global rivals. That is why Nash and Rippel believe RedDoorz is such a compelling investment prospect, even when compared with OYO.

Woe the unicorns?

The early successes of RedDoorz and OYO notwithstanding, 2019 has so far seen a number of high-profile failures and missteps by once seemingly imperious unicorns. The list of failed or struggling unicorns over the past five years is growing.

Ride-hailing giants such as Uber and Lyft have significantly underperformed their IPOs earlier this year. Both companies have had long standing questions on profitability and cash burn rates, even well before going public.

Going back a few years, US biotechnology start-up Theranos, helmed by its charismatic founder Elizabeth Holmes, promised to revolutionise the medical testing sector. The billions in investments the company received sensationally made Holmes the youngest and wealthiest self-made female billionaire in the US at one time, according to Forbes.

In 2015, a Wall Street Journal exposé revealed serious allegations of fraud, with employee complaints revealing that the company’s supposedly breakthrough blood testing machines were inaccurate and not fit for purpose. The allegations sent Theranos into a tailspin, culminating in its closure last year.

Regulators filed fraud charges against Holmes and her former chief operating officer Ramesh “Sunny” Balwani. At the time of writing, the two are fighting the criminal charges in a US court.

The latest multibillion-dollar implosion is that of co-working start-up WeWork. Another company backed by the billions of SoftBank, WeWork saw a high-profile crumbling of its much-anticipated IPO, initially set for the second half of this year. Since then, founder Adam Neumann has been removed as CEO amid allegations that the company was vastly overvalued.

Last month, The Wall Street Journal reported that SoftBank had agreed to take a majority stake in the ailing start-up. As part of the agreement, Neumann walked away with a payout of nearly US$1.7 billion in exchange for agreeing to cut ties with the company he founded. The deal values WeWork at just US$8 billion, giving SoftBank a roughly 80% stake in the company. Just a few months ago, WeWork was valued at US$47 billion.

The growing list of failures has brought into sharp focus the detrimental impact on investors. Should high-net-worth individuals, limited partners and even public markets have an appetite for technology companies with opaque business models and a long-standing track record of heavy losses?

Nash and Rippel hasten to distance their portfolio company from recent technology struggles. “While it is difficult to comment on some recent tech IPOs as we were not investors in those companies, we observe that ultimately, investing in innovation requires a long-term horizon. We also note that the larger driver of venture capital investments and IPO appetite tends to be the broader, macro-IPO cycle [which occurs in waves and is loosely correlated to economic cycles], rather than the performance of any one or two particular companies,” says Nash.

They also note that RedDoorz founder Amit Saberwal runs a very lean operation and is careful to avoid the excesses associated with founders who have come into millions of investment dollars. Instead, they point to the outperformance of a slew of global tech IPOs over a 10-year period (July 2009 to July 2019). When ranked by aftermarket IRR, investors who bought into a slew of now-household technology IPOs and held the stocks until the present day would have been handsomely rewarded.

Between the respective IPO dates and July this year, investors would have seen returns of between 101.9% and 14.3% had they invested in any of the top 20 IPOs during the time frame in question. The proprietary ranking includes Facebook, HR solutions giant Ceridian HCM Holding Inc and Sea.

Original Article: https://www.theedgemarkets.com/article/private-equity-looking-southeast-asias-promising-tech-businesses

Asia Partners on CNBC - “We don't look for unicorns, we look for rhinoceroses”

Nick Nash of Asia Partners says his private equity firms looks for humble, quiet, underappreciated companies to invest in. He describes these as "rhinoceroses" instead of "unicorns," which is what start-ups valued at more than $1 billion are called.

Link to Interview: https://www.cnbc.com/video/2019/11/13/we-dont-look-for-unicorns-we-look-for-rhinoceroses-asia-partners.html

20 unicorns will emerge in Southeast Asia by 2030, predicts Asia Partners’ Nick Nash

It’s a “golden age” for aspiring unicorns in Southeast Asia, according to Nick Nash, co-founder of growth equity investment firm Asia Partners. At current levels of affluence, the region is in a sweet spot – the same zone that China and Japan were at when a majority of their tech companies went public.

Nash was formerly the group president of internet company Sea, which runs gaming platform Garena, ecommerce site Shopee, and payments platform AirPay. He stepped down from the role in December 2018, after the Singapore-based firm’s October 2017 trade debut on the New York Stock Exchange. He went on to launch Asia Partners in January this year.

Delivering the keynote address at the 2019 Tech in Asia Conference in Jakarta, Nash said that at present, Southeast Asia’ current zone of per capita income sits between China and India. At this zone, discretionary income increases exponentially – around six times – when income doubles, creating an opportunity for businesses looking to scale.

He added that most of the tech companies in China went public in or around that “zone of affluence” – a point where spendable income grows from 5% to 15% of total income – which occurred in the country between 2003 and 2013. Korea and Japan experienced a similar trajectory.

The same phenomenon could explain why it was challenging to build a large-scale business in India, despite its vast population potential of 1.3 billion. “On average, each of them only earns US$2,000 a year, and only US$100 of that is discretionary,” Nash said.

He observed that every Chinese tech company that listed in the last 25 years did it in four steps. “They laid the table with telecommunications. [Then] they had a first generation of web companies, a second generation that was a little bit more specialized, and a third generation of very mobile- oriented companies that were also very offline-enabled.”

By studying the Chinese playbook, Nash predicts that 20 more unicorns will emerge from the region in the next decade, coming from sectors across online-to-offline, online health, social/chat, ecommerce logistics, and online travel, among others.

Playing to home court advantages

Southeast Asia’s complexities could be part of its home court advantage “because if something is complicated, at least we [Southeast Asians] can understand and navigate it,” Nash noted.

Local companies have prospered and even outdone their global competitors in some instances, thanks to their understanding of local markets as well as mastery of the supply chain and cross- border interactions.

“You’ve got six major economies, and all of them have a different gift,” Nash pointed out. Companies can go regional by capitalizing on each country’s relative strengths: the size of Thailand and Indonesia’s gross domestic product and population, Singapore’s accessibility global capital markets and abundance of technical talent – an advantage that Vietnam also has.

Many of today’s tech startups have another edge that their predecessors didn’t: their founders are alumni of companies that are already regional. The 10 pan-regional “academies” like Gojek, Garena, Grab, Lazada, Facebook and Google etc. – have collectively produced over 20,000 “graduates,” and 10% of them have gone on to put up their own businesses.

Armed with experience in navigating Southeast Asian markets, members of a growing Lazada mafia are setting up shop in the region. The experience of building a company from nothing to unicorn status imparts valuable lessons, such as how to be more operationally efficient, former executives told Tech in Asia. This alumni network could also open doors for potential investment deals down the line.

Unlike previous generations in which entrepreneurs generally met people in a university setting or through family networks and consultancies, the current crop of founders can pull together their peers from regional companies like Grab and Gojek – peers who already know how to build a regional business.

In the last few years, a rising number of Indonesians have been studying in other Southeast Asian countries like Malaysia and Thailand, but this practice can be encouraged on a larger scale, Nash said.

China’s tech boom was fueled by a dramatic upskilling of its workforce – 11 times as many Chinese students are pursuing undergraduate degrees in the US today than two decades ago. The ongoing trade war and military tensions between the US and China presents an opportunity for Southeast Asia to take advantage of a “low-hanging fruit” – to obtain engineering and specialized professional degrees abroad. “A lot of people who used to go to America from China – those seats are now empty,” Nash adds.

A missed opportunity

Though over 200 investment firms – including family offices – in the region back companies that seek seed funding and over 26 firms invest in series A and B rounds, only about three companies are looking to plow in between US$20 million to US$100 million in series C or D rounds, Nash revealed.

But that stage is the crucial bottleneck that stands between businesses struggling to scale and those that rise to unicorn status.

Investors like Singapore’s sovereign wealth fund Temasek Holdings are putting more resources into earlier-stage fundings. Last month, Vertex Venture Holdings – Temasek’s venture capital arm – raised US$290 million for a new fund that targets growth-stage companies. The Vertex Growth Fund is expected to invest between US$10 million to US$15 million per startup.

Temasek has also launched a US$50 million joint venture fund focused on logistics and invested in at least one seed-stage startup.

The investment firm, however, remains “very focused” on the segment of “aspiring unicorns” valued between US$100 million to US$1 billion, Rohit Sipahimalani, joint head of Temasek's portfolio strategy and risk group, told the Straits Times earlier this month.

“There’s an old joke that it’s easier to raise US$400 million or US$4 million in Southeast Asia than it is to raise US$40 million,” Nash said.

According to Nash’s calculations, US and China are doing about 700 and 130 of those deals, respectively, every year. He added that in Indonesia, such deals happen at a frequency of 0.0039 per million citizens annually, which means it’s 600 times harder to raise a series C and D in Indonesia than it is in the US.

But less money is being allocated into such funding, even when taken in dollar terms. “[North] America puts 0.12 basis points of its gross domestic product into those deals every year. Indonesia is putting 0.5 basis points of its gross domestic product annually,” he added.

Nash urged investors to rethink the way they look at Indonesia. It’s a market where commercial real estate has the same risk-return ratio as the tech sector, and yet the former receives much more capital than the latter.

Capital market activity is telling: in the 1990s, Indonesia was a “very active” user of the US capital market, Nash said. From 1990 to 2000, Indonesian firms raised about US$9 billion in capital markets, and a quarter of that came from the US – more than the money raised from Chinese companies.

Yet from 2001 to today, there hasn’t been a single Indonesian IPO in the US. “There’s no legal or structural reason for that. Indonesia remains the fourth-most important country on the planet and the top two in terms of growth, yet the Chinese have continued to tap into the US market for growth and we haven’t,” Nash added.

It’s a more dismal picture when the tech sector in Indonesia is singled out. “In the 1990s, 55% of the capital they raised came from the American stock market. But in the 2000s, none of them did.”

https://www.techinasia.com/20-unicorns-emerge-southeast-asia-2030-predicts-asia-partners-nick-nash

Rajiv Jain Discusses Portfolio Management (Podcast)

GQG Partners Chairman and Chief Investment Officer Rajiv Jain speaks with Barry Ritholtz on Bloomberg Radio about portfolio construction, investment focus, and deciding when to sell.

Listen to the podcast here >

GQG Partners Celebrates Three Years of Strong Growth and Executing Long-Term Vision

FORT LAUDERDALE — June 3, 2019 — GQG Partners LLC (GQG Partners) recently celebrated the three-year anniversary of its founding. As the firm surpasses more than US$22.5 billion in regulatory assets under management, its co-founders reflect on the past three years:

RAJIV JAIN, GQG Partners’ co-founder and Chairman & Chief Investment Officer
“The most exciting thing to me is seeing the cornerstones of our long-term vision settle into place. Our culture and commitment to client alignment is resonating with some of the most sophisticated consultants and institutions all over the world, which has been very gratifying.”

TIM CARVER, GQG Partners’ co-founder and Chief Executive Officer
“We’re so proud of the quality of our team, of the quality investors we’ve attracted, and of the performance we’ve been able to deliver. I couldn’t have dreamed of a better beginning to our journey and am looking forward to the years to come.”

GQG Partners commenced operations in 2016 under the leadership of prominent investor Rajiv Jain and business leader Tim Carver. The two shared a long-term vision of building a highly client-aligned investment boutique that would outlive them as founders. Mr. Jain and Mr. Carver split investment management and business management responsibilities along CIO and CEO operating lines. Mr. Jain is Chairman and the controlling shareholder.

As a boutique investment firm, GQG Partners remains deeply committed to client-alignment. “From day one we’ve viewed ourselves as co-investors with our clients. Our core values as a firm have focused on client alignment and investment excellence. Being an employee-owned company empowers us to build around those values,” states Mr. Carver. GQG’s co-founders have the vast majority of their net worth invested in the business and funds managed by GQG. The firm has further aligned GQG employees with clients through a compensation program that ensures nearly all employees are invested in GQG strategies. “I believe having skin in the game is critical, full stop,” says Mr. Jain.

Regulatory assets under management at the firm have grown to over US$22.5 billion in four investment strategies — Global Equity, International Equity, Emerging Markets Equity, and US Equity — through a combination of separately managed accounts, private funds, collective trusts, and mutual funds (and their international equivalents).

GQG Partners now has 56 associates across offices in Fort Lauderdale (firm headquarters), New York City, Seattle, and Sydney. Seven of those associates join Mr. Jain and Mr. Carver as equity owners in GQG Partners, a number the firm intends to expand. “It has always been my vision that we would have broad ownership among our team. At the same time, I believe equity should be issued to colleagues whose commitment and talent help us build something distinctive in the market — people whose vision reaches beyond today, who are committed to building a truly enduring institution,” states Mr. Jain.

What is next for GQG Partners in crossing the three-year threshold? “We have laid a solid foundation and have built a great team. But we’re operating in a dynamic market. The change in the asset management landscape that we are experiencing today is greater than any time I can remember. I believe the commitment, intensity, quality and nimbleness of our team provides us a tremendous strategic advantage in this environment. We will continue to make investments in our people and will always strive to enhance the client experience at GQG. We are looking forward to what lies ahead for the firm, our employees and most importantly, our clients,” states Mr. Carver.

Incus Capital awarded the 2018 Speciality Finance Lender of the Year in Europe.

The Spanish asset-based lender enjoyed a spectacular fundraising success in 2018, announcing a first and final close of its European Credit Fund III on €500 million. According to the firm, it was not really a formal fundraising at all in the conventional sense. “We went with what people were willing to support without a formal fundraising so the deal team were not interrupted,” Incus managing partner Andrew Newton told PDI. “There was no road show or pitch.”

Newton says the firm has achieved a “mid-teens” rate of return on its two previous funds, which closed on €130 million and €270 million. The firm – which targets areas such as real estate, infrastructure and leasing – has grown from its Madrid roots into offices in Lisbon, Paris and Milan.

Speaking of the outlook for 2019, Newton says: “There are lending strategies that we have been priced out of – not because we cannot compete – but because we feel that the risk adjusted return does not make sense.”

https://www.privatedebtinvestor.com/print-editions/march-2019-issue/pdi-annual-awards-2018-europe-winners/

Emerging Markets Upstart Nears $15B Two Years After Opening Doors

GQG Partners CEO Tim Carver spoke to FundFire about GQG’s rapid asset growth since its founding, dedication to client alignment, early pursuit of consultants, and focus on building infrastructure to stay ahead of growth.

Copyright 2018, Money-Media Inc. All rights reserved. Redistributed with permission. Unauthorized copying or redistribution prohibited by law.

Incus Capital Announces Closing of €500m European Credit Fund III

Incus Capital (“Incus”), the Madrid based specialty credit firm, strengthens its position amongst Europe´s leading asset-backed credit investors with the recent close of its €500 million European Credit Fund III. The firm also announces further expansion in Southern Europe with opening of Milan office.

Incus´ latest fundraise almost doubled the €270 million it collected for the final close of its second credit fund in 2016. Fund III attracted capital commitments from a broad range of institutional investors, including leading public and private pension funds, insurance companies, and family offices. Over 50% of the capital came from investors in the USA and Canada, with the balance coming from Europe. The capital secured for the Fund III raise brings Incus´ assets under management to €1 billion.

“We are delighted to have raised Fund III in such a short period of time and would like to take the opportunity to thank both our long-standing backers and first-time investors” said partner Martin Pommier. “We found ourselves needing to raise Fund III much sooner than anticipated since Fund II is fully committed well ahead of the end of its investment period. Given the strong re-up rate from existing investors and the addition of high-quality new investors, we were able to hold just one main close to reach our €500 million target. This is in large part due to our consistent track record, but also the fact that many investors are more comfortable with the asset class and want exposure to our specialty credit strategy.”

This result follows a very active year for Incus, with significant funds deployed on new transactions and active disposals on previous investments from Fund I and Fund II. Notable realisations during 2017 and 2018 have included the sale of four Spanish Retail Centers and a Spanish Photovoltaic facility. More recently Incus concluded the sale of a large Portuguese Mortgage Portfolio that had been purchased from GE Capital in 2016. All realisations were well above the 1.5x cash multiple target for the funds.

Incus has become a leading specialty credit franchise across Europe by providing flexible credit solutions to mid-market companies. “Specialty credit is becoming more understood in the market and we are finding ourselves very well positioned for winning business in our core jurisdictions of Spain, Portugal, France and Italy” says Managing Partner Andrew Newton. “Our market niche remains very clear and the team is focused on sourcing and managing asset-backed investments that meet our fund returns and underwriting standards. Our pipeline of opportunities and our deal team is stronger than ever.”

Incus has invested over €800 million in asset-backed transactions since inception in 2012. The majority of these transactions have occurred in Spain but the firm has also been busy closing deals in the rest of its core markets. Following the opening of the Paris office in summer 2017, the firm inked its first French transaction in May 2018 – a €50 million financing to a leading Real Estate developer and asset manager. “There is a clear need for Incus product in France but we remain very selective” said Managing Director for France Sebastien Kessas. “We are focused on providing the same product in France that we have been providing to mid-market companies in Iberia for years. There is good awareness of the Incus name in the market now and we will look to build on the success of this recent transaction”.

The firm has recently announced the next phase of its expansion plans with the opening of a Milan office. Joining Incus is fixed income veteran Corrado Giovanelli as the Managing Director for Italy. Corrado has over 25 years of experience, primarily in fixed income and was most recently Head of Global Market sales at Credit Suisse for Italy. “We continue to expand the depth and the breadth of our deal team” said Andrew Newton. “We are delighted that Corrado has joined our team and are excited about the prospects of furthering our business in Italy. I am confident that his deep industry knowledge, expertise, networks and ability to deliver will prove invaluable as we continue to grow our platform.” Incus Capital arranged and funded a €55 million Bond Offering for the Autostrada Pedemontana Veneta in Italy during 2017.

About Incus Capital

Incus Capital is a Madrid based Specialty Credit investment firm with offices in Madrid, Lisbon, Paris and Italy. The firm focuses on providing flexible credit solutions to mid-market companies in Europe. The investment strategy includes a strong focus on downside protection and asset-backed collateral. Target investment sizes are between €5 million and €100 million. Incus Capital has €1 billion of assets under management and has invested over €800 million in more than 40 transactions across various sectors since inception in 2012.

About Corrado Giovanelli

Corrado is a Managing Director and Head of Italy at Incus Capital with over 25 years of experience in the financial markets, primarily in fixed income trading and sales. From 2010-2018 he was Head of Global Market sales at Credit Suisse for Italy. Prior to 2010, Corrado held several senior fixed income positions at Nomura, Lehman Brothers, Merrill Lynch and JP Morgan in London, Milan and New York. He has been involved in multiple complex transactions in Italy with banks, insurance companies, asset managers and government related entities. Corrado holds a degree in Economics with major in Finance from Bocconi University (Italy).

About Sebastien Kessas

Sebastien is a Managing Director and Head of France and Benelux at Incus Capital with more than 20 years of experience in the financial markets. Prior to joining Incus, he worked at Natixis Asset Management as an Advisor to senior management. From 2002 to 2016, Sebastien worked in the fixed Income department of Morgan Stanley, more recently as a Managing Director and Country Head of France. In his various roles, he has been involved in a number of complex and strategic credit restructuring and deleveraging transactions for French and Benelux institutions. Sebastien holds a BA and a Master Degree in Financial Markets (DESS 203) from University Paris Dauphine (France).

GQG Partners Raises Over US$5 Billion One Year After Its Launch

News from our partner GQG:

One year after its founding, GQG Partners LLC announces that it now oversees client assets in excess of US$5.3 billion, a display of remarkable growth.

GQG Chairman and Chief Investment Officer Rajiv Jain’s passion for equity investing led him to establish the firm in June 2016. Strong client alignment is one of the principles on which the firm was founded.

“Managing another person’s wealth is a privilege and an honor. We fundamentally believe that the best way to ensure long-term client focus is to invest our own capital in the same strategies, right beside our clients’ assets,” said Mr. Jain, who has invested a large majority of his personal net worth into GQG Partners’ strategies. “We also invested meaningfully into the business right from the beginning to build a world-class institutional platform and assemble a team of senior experts, with a diversity of thoughts and experiences.”

More than 100 institutional clients across the globe have already invested in GQG Partners’ strategies. There has been a strong response from people who have followed Mr. Jain’s hands-on approach for years, many of them have never previously invested with him before.

An Experienced Portfolio Manager at the Helm

GQG’s exceptional growth is a testament to the track record of Mr. Jain, who is extremely well-versed in the inherent volatility of emerging markets, over the past two decades. His in-depth understanding of emerging markets is rooted in the unique approach that he and his diverse team of analysts apply to investment selection.

“We create a portfolio of companies that we believe have long-term growth prospects which aren’t strongly correlated to macroeconomic conditions,” explained Mr. Jain. “Our approach is rooted in adaptability and independent thought, allowing us to navigate inflection points over the long term.”

GQG teamed up with Goldman Sachs Asset Management to launch the Goldman Sachs GQG Partners International Opportunities Fund (GSIHX) in December 2016. The Fund’s strategy involves investing in a concentrated group of high-quality companies across developed and emerging markets. The Fund, which is sub-advised by GQG and distributed by Goldman Sachs, seeks to outperform comparable international funds over a full market cycle while taking less risk. Additional information about the Fund can be found at:

https://www.gsam.com/content/gsam/us/en/individual/products/fund-finder/gs-gqgpartners-international-opportunities-fund.html.

At the same time, GQG Partners launched its own GQG Partners Emerging Markets Equity Fund (GQGIX), which seeks long-term capital appreciation in the emerging markets. More information about the Fund is available at:

https://gqgpartners.com/products/us-mutual-funds/.

In Europe, GQG Partners launched the GQG Partners Emerging Markets Equity Fund (GGQEMAU:ID), a sub-fund of GQG Global UCITS ICAV, an Irish UCITS structure, in February 2017. The European Fund seeks to deliver attractive, benchmark-agnostic returns over the course of a full market cycle by investing in high-quality, large-cap companies in emerging markets.

The UCITS Fund has crossed the US$100 million AUM threshold and is quickly approaching US$150 million as of this writing, creating high expectations for future growth in Europe. More information about the Fund is available at:

https://gqgpartners.com/products/ucits-funds/.

Mr. Jain joined GQG Partners in June 2016 after having worked for Vontobel Asset Management since November 1994. Under Mr. Jain’s investment leadership, Vontobel Asset Management grew from less than US$400 million in assets under management in 2002 to nearly US$50 billion in assets under management in 2016. Mr. Jain served as Co-Chief Executive Officer of Vontobel beginning in July 2014, and Chief Investment Officer and Head of Equities since February 2002. Mr. Jain was the sole Portfolio Manager of Vontobel’s International Equities and Emerging Markets Equities products since 2002 and 1997, respectively, and served as lead Portfolio Manager of the Global Equities product beginning in 2002 until his departure in March 2016.

About GQG Partners

GQG Partners LLC is a boutique investment management firm focused on global and emerging markets equities. We rely on a team of traditional and non-traditional analysts—who possess backgrounds in fields such as investigative journalism and forensic accounting—to challenge the short-term projections and backward-looking dogma that often dominate market discourse.

Headquartered in Fort Lauderdale, Florida USA, we strive for excellence at all levels of our organization through a commitment to in-depth knowledge of the markets as well as independent thinking, continual growth, and giving back to investors and our community. For more information, please visit www.gqgpartners.com.

Atomico Closes Fund IV: $765m for Europe’s Most Ambitious Founders

News from our partner, Atomico:

Today we are proud to announce our new fund. At $765m Atomico IV is one of the largest venture capital funds ever raised in Europe and will enable us to do more of what we love: work with the most ambitious founders who combine disruptive technology with the vision to build global category winners.

We’ll continue to invest in companies, from Series A onwards, that have achieved product market fit and are ready to scale. You can read our manifesto that guides every decision we make here.

Raising a fund of this size is testament to the growing confidence in European tech – which we have championed from the start – and our unique approach to partnering with founders to help them build successful companies and accelerate growth. When we invest in a company, we give everything we have, not just capital.

That’s because we’ve been there and done it, which means we have a deep respect for our founders and are humbled to be part of building their companies. We’ve always had strong founder DNA and a laser focus on growth acceleration, and today we are a team of over 40 people – including founders and executives with deep operational expertise from the world’s fastest growing companies, such as Facebook, Google, LastMinute.com, Skype, Spotify, Uber and Virgin. We use that experience to coach and push entrepreneurs, hard, in areas where they need help the most, like user growth, hiring and retaining the best talent, market-entry and partnerships, or marketing and communications.

We’re excited that we’re now in a position to invest one of Europe’s largest funds and deploy Europe’s most experienced venture team to partner with even more superstar founders. As our State of European Tech 2016 report shows, the European ecosystem and the pipeline of new talent has never been healthier. Today there are 4.7 million professional developers in Europe and more than 20% of European MBA graduates are going into tech. In 2016 over 150 cities hosted 50 or more tech meet-ups, and in total $14B was invested across 2800+ rounds. In the past 12 months most of these rounds were at seed and series A, and the conversion rate to later stage is still relatively low. Atomico IV will help to redress this balance by backing companies at the point they are ready to go global – at Series A and beyond, for the whole journey.

Since we launched Atomico in 2006, we’ve partnered with some incredible companies – such as Klarna, Rovio, Supercell, The Climate Corporation, GoEuro and Skype, and in the last few months we’ve invested in growing companies spanning a range of sectors and tech hubs – Pipedrive, Bitmovin, Scandit, Lilium and Uniplaces to name a few. Over the coming months we’ll be spending even more time meeting ambitious founders who are using disruptive technology to change industries and the way we live – we can’t wait to partner with them.