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Private Equity Firms Have Set Business Plan

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It is also important to note that for the logistic related PE, general partner returns variability is yet another risk factor. It can be noted that for the eight years preceding 2005, Asia's fund returns variance was relatively higher in comparison to the U.S. And Western Europe variance (INSEAD 2010). While the variance in the U.S. And Europe stood at 15% and 13% respectively, Asia's fund returns variability was registered as 23%. Though this could be driven partly by manager-selection skills, such a selection could turn out to be an uphill task for such a logistic related PE given the nature of the market.

It may also be prudent to note that according to the INSEAD survey; most limited partners are currently dissatisfied with their existing general partners (INSEAD, 2010). For the limited partners of a PE seeking to set up operations in Hong Kong, this could yet be another key consideration to take into account. The dissatisfaction stated above chiefly emanates from strategy drift, operational issues as well as poor returns. Furthermore, in our case, limited partners of the logistic related PE starting operations in Hong Kong could face challenges while seeking to select a portfolio which in addition to being moderate in terms of risk also comes across as being well-diversified. The challenge here may further be compounded by the fact that quite a good number of general partners lack appropriate track records. Therefore, for limited partners, it may be advisable...

Further, though challenges abound on this front, private partners should be sure to undertake their due diligence. While at it, the logistic related PE seeking to start operations in Hong Kong especially given the current market in China and by extension Asia could find it rewarding to have a ground team collecting information as opposed to over reliance on remote processes of due diligence.
Conclusion

In conclusion, it can be noted that given the adverse effects the global economic crisis had on Europe and the U.S., emerging markets continue to be seen as new opportunities by most private equity investors. However, while seeking to start operations in these markets, PE firms should keep in mind that while emerging markets present opportunities seen to be particularly unique, pitfalls abound.

References

INSEAD (2010). INSEAD -- AXA Private Equity Survey of Top LPs and GPs in Asian Private Equity. Retrieved January 8, 2012, from INSEAD website: http://www.insead.edu/facultyresearch/centres/global_private_equity_initiative/publications/documents/INSEADAsiaPESurvey.pdf

INSEAD (2010). Asian Private Equity (A): The Quest for Return. Retrieved January 8, 2012, from INSEAD website: http://www.insead.edu/facultyresearch/centres/global_private_equity_initiative/publications/documents/AsianPrivateEquity-A-TheQuestforReturn.pdf

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References

INSEAD (2010). INSEAD -- AXA Private Equity Survey of Top LPs and GPs in Asian Private Equity. Retrieved January 8, 2012, from INSEAD website: http://www.insead.edu/facultyresearch/centres/global_private_equity_initiative/publications/documents/INSEADAsiaPESurvey.pdf

INSEAD (2010). Asian Private Equity (A): The Quest for Return. Retrieved January 8, 2012, from INSEAD website: http://www.insead.edu/facultyresearch/centres/global_private_equity_initiative/publications/documents/AsianPrivateEquity-A-TheQuestforReturn.pdf
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