Emerging Market Based Asset Manager Checklist

“First Who Then What” – Jim Collins

While investors and advisory firms all love to “rally around a deal”, our sponsor selection process starts much earlier than this.  We start with selectively choosing the Asset Manager and we actually filter out many sponsors before they meet investors.

Here are the criteria we use for choosing our Asset Managers:

Fundamental Understanding of Opportunistic Returns – Local Asset Managers sometimes think that returns that are acceptable locally are also acceptable to overseas investors.  We make sure that the sponsor clearly understands the return requirements are usually 6% to 8% higher based on USD hedging costs.

Proprietary Deal Flow –  We do not accept sponsors whose total deal flow is an auction process and hope.  If there is no method to secure quality deal flow and if an auction results in a bidding strategy that does not include last look based on the Asset Manager’s proven ability to close, we do not move forward.

Experience Base and Investor Theme – We do not accept clients who do not have experience in the sector that they have chosen to execute.  We value our and global investors’ time greatly and do not accept sponsors who are learning on the job.

Underwriting Capability – We only engage Asset Managers that are ready, with InDev support, for the rigors of a deep-value investor underwriting process.  This deep dive into determining the potential value of an asset and proving it out is critical.

Pipeline and Scale – We only engage sponsors that have the ability to provide a large pipeline of opportunities on a vetted investment thesis. We are not searching for one-hit wonders.

Sponsor Capital – No Cash, No Deep-Value Investor Partner.  Lack of alignment with our investor clients is a non-starter.

Track Record of Success – Asset Managers must have a documented track record of success and successful exits in the given sector of focus.

Process Driven – We only work with sponsors that have a culture of execution.  We actually verify their work processes and project management capabilities before signing them up as clients.