15 September 2019
Fund managers and PE investors network at the annual SuperReturn Asia conference. Photo: YouTube (SuperReturn Global Series)
Fund managers and PE investors network at the annual SuperReturn Asia conference. Photo: YouTube (SuperReturn Global Series)

How PE funds seek partnerships through industry events

It’s once again the most important time of the year for Hong Kong’s private-equity (PE) and venture capital (VC) firms.

With the annual SuperReturn Asia conference getting underway, hundreds of PE investors as well as fund managers from around the world have gathered in the city. Meanwhile, across the border, Shenzhen is also seeing some major conclaves of industry players.

During this period, general partners (GP) — those who manage the funds and execute the investments — will try their best to network deeply with visiting investors.

On top of attending the SuperReturn meetings, networking events organized by intermediaries — investment banks or law firms — and night events at Happy Valley are also a must for collecting business cards.

As a GP, I used to be one of them. Frankly speaking, for me, networking is even more energy-consuming than working on projects.

You have to make appointments with the limited partners (LPs), the primary source of capital into a venture fund, several months in advance. Otherwise it will be hard to “fish” the big players.

I have some interesting observations. Since the SuperReturn’s annual meeting is the top-level one among such events and the “ticket” price is also the highest — a fee of more than HK$40,000 for the four-day event — many small-sized funds or intermediaries will just wait for the LPs to come out at the reception desk.

Through this route, they needn’t spend on the conference fees even while being able to connect with the visiting LPs.

But such strategy is less effective today. As the return that “fund on fund” (FoF) model can offer is lower, many FoFs have smaller appetite and won’t show up at such events, leaving pension funds, endowment funds and sovereign funds as the major LPs.

On the other side, the number of GPs is increasing, especially in the mainland. With limited investors and a large number of fund managers, one should plan carefully in advance to strike some deals.

In the end, networking sessions are just an opportunity for the LPs and GPs to meet. Whether the deals would be successful depends really on GPs’ track records.

Having a good relationship with LPs will take you only so far. Ultimately it will be the actual performance that counts.

Realizing this, even the mainland LPs have started to transform from people relationship-oriented investments to more scientific decision-making methods like their overseas peers.

This article appeared in the Hong Kong Economic Journal on Sept. 24.

Translation by Myssie You

[Chinese version中文版]

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Columnist of the Hong Kong Economic Journal