General partners (GPs) who spread their money across different asset classes provide comfort to limited partners (LPs) by giving them diverse exposure, said panelists during a group discussion at the VCCircle LP Summit on Tuesday.
The two-day annual summit kicked off in Mumbai today with the who’s who of the alternative investment industry along with a packed audience comprising LPs, PE and VC fund managers (GPs), investment bankers and other rainmakers.
"As a limited partner, we [would] rather commit larger pools of capital to few general partners with a diversified asset allocation rather then proliferate investment to several GPs," Promeet Ghosh, managing director at Singapore state investment firm Temasek Holdings, said at the session titled 'Asset Class Diversification in AIFs – Hits and Misses'.
The session was moderated by Jaideep Mehta, chief executive officer of News Corp VCCircle.
After entering India 13 years ago, Temasek has built an active investment profile in the country. Ghosh said the firm now has a $10 billion exposure to India through direct investment as well as commitment to GPs. The commitment through direct investment is higher compared to fund -based investment, he added.
Asset diversification is a core interest for LPs because it involves their objective of fund allocation, said Prashant Purker, managing director, CEO and co-head of private equity at ICICI Venture Funds Management Co. Ltd.
Purker said ICICI Ventures, where Temasek is a limited partner, has diversified its asset classes and has partnered with larger LPs to provide stability to the investments.
These large funds also lend an advantage when interacting with various investment parties including the government, he added.
Citing an example, Mohit Batra, executive director-infrastructure at ICICI Venture Funds Management, said: "We have partnered with Tata Power to launch an investment platform. While we bring in the expertise on deal sourcing and structure, our partner Tata brings in the industry expertise"".
The platform counts some large pension funds as its limited partners because we managed to bring in a diversification that they needed, he said.
ICICI Ventures also has a fund under AION Capital Partners, a joint venture with US-based PE major Apollo Global.
"Limited partners also consider asset diversification as [having] a reputation impact," said Kalpesh Kikani, managing director of AION Capital. "Different assets also help in a better risk management, governance issue and better investor relations and communications on a quarterly basis".
The panelists also said that such diversfication helps bring in a lot more capital into the country.