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Siguler Guff Does Distressed and BRIC — Why Not Distressed BRIC?

Siguler Guff managing director Ching Tan said today that his firm is looking into China’s distressed market, but has yet to make any plays. It’s not certain which fund the investment would come from, since the firm recently closed its third distressed fund-of-funds and is on the cusp of closing its second BRIC fund (BRIC stands for Brazil, India, Russia & China). My best guess is that it would be the latter, since that’s the fund Ching manages. 

Ching’s comments were made on a panel at China Venture Capital & Private Equity Forum at the Westin Times Square, New York.

Siguler Guff’s interest in the area contrasts sharply with comments made earlier today by a panel “regional experts” on distressed investing in Asia. According to Reuters, investors at a FinanceAsia conference said it is too early to jump into distressed investing across Asia.

While loan defaults are expected to rise in Western regions as well, the restructuring and court systems there are seen as more dependable and predictable as compared to Asia.

Earlier in the day, Siguler Guff founder Drew Gruff outlined the firm’s continued interest in Asia, saying China is the main focus of Siguler Guff’s BRIC funds. It has the most general partners and transaction multiples have been lower in the region than in Brazil, Russia and India. He said the firm sees major opportunities in both private equity and venture capital in the region, but noted that buyout investing is “the toughest nut to crack.”

He added, “We don’t believe in the big buyout model or that the best returns will come from Carlyles and Blackstones of the world.” The firm has an emphasis on local firms with teams that have been educated in China and abroad.

Other managers of China-targeted funds echoed that sentiment during the panel. Anthony Roscigno, a portfolio manager at JP Morgan, said his firm doesn’t see traditional buyouts coming to the fore in the region anytime soon. “We look at China as a senior stage venture capital investment,” he said. “We just don’t think it has the right characteristics to support a buyout market as we know it in the US and Europe.”