Adams Street Partners is one of the industry’s original fund of funds, with a history that goes back 32 years. It is also a mammoth, managing $11 billion for more than 170 institutional clients. One thing it is not is arrogant, which explains its measured approach to Asia.
“We didn’t just open an office in Asia, put someone on the ground and start investing,” says Piau Voon Wang, the partner who is charged with executing Adams Street’s strategy in Asia. “We have to meet with [potential fund managers] and track them over several years. It’s not a straightforward process. You can’t look at a spreadsheet or EBIDTA. It’s a decision made mainly on people.”
Wang spent from 1999 to 2003 researching the market and fund managers in the region, making four to five trips to Asia each year. He made his first Adams Street investment in an Asian fund in 2003. And while Adams Street now has five investments in Asian fund managers (two unannounced), those investments are a fraction of the money that the firm has in place at around 300 private equity partnerships around the world.
Adams Street traces its history back to 1973, when it was born within First Chicago National Bank. The private equity operation was spun out as Brinson Partners in 1989, and then Brinson was sold to Swiss Bank Corp. (SBC) in 1994. When SBC merged with United Bank of Switzerland to become UBS in 1997, the private equity group was spun out once again to form Adams Street Partners in 2001.
Adams Street’s first investment in an Asian fund was with Affinity Capital, founded by K.Y. Tang, a UBS alum. Adams Street had a high level of comfort with the people who were their former corporate cousins at UBS.
Next, Adams Street invested in two country funds: ChrysCapital of India and Pacific Equity Partners of Australia. Most recently it invested in Navis Investment Partners Asia and CVC Capital Partners, which is reportedly close to closing a new $2 billion Asian buyout fund.
Wang, who divides his time between Europe and Asia, where the firm plans to open an office in Singapore over the next year, spends most of his time evaluating potential managers.
He drills down into five key areas of what fund managers do: investment due diligence, deal origination, deal execution, deal monitoring and exits.
“We look for the areas where a fund manager has strengths,” he says. “Each is different. Some are good at managing their portfolio companies. Some are good at sourcing deals. Some add great value to their firms. Some are good at selling their companies.”
While the firm won’t disclose how much money it has committed to its current managers in Asia, it will say that it expects to invest in one to two managers each year over the next five years. Wang explains that Adams Street doesn’t have a fixed allocation that it must commit in the region, but if it translates investments in one to two managers across five years it adds up to an investment range of $50 million to $100 million in the region over that time frame.
Manager selection in the region will be a “bottoms-up” decision, Wang notes. He adds that he’ll consider new fund managers if he’s convinced by their investment proposition.
As for direct investing in the region, the firm hasn’t made any direct investments yet, but it is looking for opportunities.
Wang has worked in Asia’s financial markets since the early 1990s, initially on the public equities side. He put in a short stint at Arthur Andersen in Singapore-working in audits long enough to know that traditional accounting was not his calling-before joining Indosuez Bank (later absorbed into Credit Agricole) in 1994, where he worked first as an analyst and later as manager of mutual funds in Hong Kong, Singapore, Malaysia and across Southeast Asia.
In 1996, and by then already disaffected with public equities, Wang joined Nikko Capital in Singapore where he began his first work in private equities, investing funds from Nikko clients into Indonesia, Malaysia, Singapore, Thailand, Hong Kong and Taiwan.
Wang’s investments crossed all sectors-from furniture makers to chemical companies to semiconductors to telecoms. By the height of the Asian financial crisis in 1998, most of group’s 15 investments throughout Asia were in some various stage of distress.
It was in that difficult period that Wang learned “not to follow hype and to be skeptical but to keep an open mind.”
It was also a learning experience that Wang says helped him to understand and empathize with the challenges faced by Asian private equity managers today.
Wang made the leap to London-based Brinson Partners (which morphed into Adams Street) in 1999, when it was recruiting managers with knowledge of Asian investing.
“The original plan was that I would spend two years here in London learning the fund-of-funds business,” he says. “But I’m still here. It’s taken a long time for us to be convinced of the opportunities in [Asia].”