Asia tipped as next private equity hub

As if the news for the US has not been bad enough, there is a paradigm shift towards Asia for private equity opportunities in new technology according to Bruno Raschle, managing director, of Adveq Management.

He said most leading US companies created over the past 30 years are technology companies (Hewlett-Packard, Intel, Time Warner, Microsoft, Apple, Cisco, Google) and venture capital is creating the leading companies of tomorrow (ebay, Amazon, Facebook), but he postulated that Asia may be a driver for a paradigm shift away from the US because of its GDP and population growth.

“There is a paradigm shift towards Asia, the size of the opportunities is enormous and government policies are backed with capital,” he said. Pointing to China as an example he said it was ranked number one globally in renewable usage in 2007, with the government investing $12 billion in renewable energy that same year. In addition China has seen an increase in capital goods production which will accelerate investments in to technology, as new value chains are created.

Since 1994, the percentage of capital goods in China’s exports has gone from about 30 per cent to more than 55 per cent; while consumer goods’ share of exports has gone from about 75 per cent to just over 40 per cent. “Technology plays a major role in transitioning economies. From basic requirements such as infrastructure to efficiency enhancers such as higher education and training and financial market sophistication,” Raschle said, “and venture capital in China is still at moderate levels compared to its potential.”

For example the US has about 255 million mobile phone users, from a population of 300 million, while China has about 547 million users, from a population of 1.3 billion. Adveq, which is a provider of private equity fund of funds and investment management services has offices, and clients, around the world, has been investing in technology in the US, Europe and Asia since 1997 (and Raschle has been investing in other guises since 1986).

Raschle pointed to a number of stocks including 3D Solid Compression founded in 2007 which is a start up incubated in cooperation with the Indian Institute of Science and Stanford University, which produces interactive 3D content generation and viewing with 1000x compression thereby allowing 3D content to be easily delivered to the mass market, for example on mobile phones. He also mentioned Shijizhuang Pharmaceuticals, founded in 1994 as a former state-owned enterprise which is now the world’s leading producer of vitamin C and 7ACA antibiotic intermediaries, and the world’s second largest producer of penicillin products. It is a global business with 80 per cent of products sold outside China.