Risk management is more important than ever, GPs say

Risk management and investment firms' operational capabilities have become more important than ever amid economic uncertainties, said speakers at the general partner (GP) session on private debt and equity at ASK 2024 on May 21.

Asset managers should focus on their expertise and understanding of industries, which will make a significant difference in their performances in a decade, according to the panelists.

Goldman Sachs Asset Management differentiates itself with value creation in Asia’s upper middle markets, said SJ Lee, head of Korea private and growth equity investments.

The firm is using a nimble and flexible approach to each market, such as targeting information tech in India, pharmaceuticals in China, content in South Korea and software verticals in Australia. There will be an increasing number of global leaders in each market over the next five years, Lee said.

Goldman Sachs will focus on developing solutions and tools to support its portfolio companies in crisis, addressing logistics and supply chain issues. This will help the companies implement relevant measures for unpredictable risks, Lee said.  

Thomas Doyle, Pemberton Asset Management’s partner and head of net asset value financing, said that while high rates raise default probabilities they also create opportunities in European private credit.

With higher-for-longer interest rates, asset managers provide private credit funds with attractive contractual returns that can compete with private equity, he said. The firm sees that the European private market has weathered the economic storms and is well prepared for a soft landing, he added.

New York-based Clayton, Dubilier & Rice (CD&R) sees the micro level of operational value creation and macro factors that affect supply and demand as more important than promising sectors, said Managing Director Nicholas Ng.

The firm mitigates uncertainties by anticipating whether it has the buffers to absorb unpredicted risks and whether it is aligned with its investors to drive performance, he noted.

Abris Capital Partners has three key standards for selecting assets, said Monika Nachyla, a partner at the Warsaw-based private equity firm. These are: whether the company can generate earnings in its local ecosystem; whether it can attract global investors for future exits; and whether it meets sustainability standards.

A view to managing the entire portfolio and using low leverage is important to be a strong player in volatile markets, and the firm is managing competitive teams to respond to unexpected crises, she noted.

Write to Jihyun Kim at snowy@hankyung.com

Jennifer Nicholson-Breen edited this article.