PE Execs Still Bullish on Asia

(Reuters) – Top executives at private equity funds said on Tuesday that the time was ripe to take greater risk in Asia, encouraging an annual conference here to invest in distressed debt opportunities and small to mid-sized companies.

“When people are not investing is the best time to invest, when people are not taking risks is the best time to take risks,” said Steve Martinez, head of Asia Pacific at private equity fund Apollo Management, on a panel at the AVCJ conference in Hong Kong.

Martinez is joined by a group of top private equity executives this week at the AVCJ, including Henry Kravis, co-founder of Kohlberg Kravis Roberts, David Rubenstein, co-founder of Carlyle Group, J Christopher Flowers, CEO of J.C. Flowers & Co.

Martinez estimates that out of $30 billion raised to invest in Asia last year, two-thirds was for China and most of that for growth investments.

For Asia’s fast growing companies, capital has become scarce, especially in China where credit tightening has hit small to medium companies hard.

“Right now is precisely the kind of time when you’re supposed to invest in Asia, perhaps in the second tier small and medium sized enterprises,” said Robert Petty, co-founder of pan-Asia distressed asset specialist Clearwater Capital Partners, speaking on the same panel.

Growing bad loans at banks are another opportunity opening up in the region and Apollo’s Martinez estimates there are about $620 billion of non-performing loans across the top 100 financial institutions.

He said Asian governments are still not forcing banks to make decisions on bad debt as they do in Europe, and there are challenges in foreclosure and enforcing law in the different markets round the region.

Petty said now is the time to take risks and invest against the cycle. He listed demographics, environmental change in China and overcapacity leading to industry consolidation among factors creating opportunities.

“Risks have created opportunities across Asia, so we love to invest in risks, we love to find places where there’s volatility and there is uncertainty,” Petty said. “Those risks are actually great opportunities to invest in companies.”

(By Stephen Aldred)