COLOMBO (EconomyNext) – Sri Lanka’s long-term pension and insurance funds can tap outside expertise to get into private equity which can boost returns and diversify risk, industry specialists said.
Ian Carew from Canada’s Northleaf Capital Partners said pension and insurance funds, especially smaller ones, found it more cost-effective to give out chunks of funds for independent private equity funds to manage.
"They want exposure to the asset class, but do not have the internal resources," Carew said. "So they outsource it to managers like us."
Carew was in Sri Lanka on a Canadian state-backed program to mentor Jupiter Capital Partners, a Colombo based private equity firm.
Indika Hettiarachchi, head of Jupiter Capital Partners says the international PE industry has evolved strict processes and governance standards to ensure that their clients’ money is well-managed.
Instead of individually selecting investees, the fund selected only the fund management firm, who will then be responsible for investing.
"When you do it through a fund manager there are checks and balances," says Hettiarachchi, who is an ex-executive of Aureos Capital, a private equity firm specializing in South Asia and Africa which traces its origins to a British Commonwealth initiative.
Carew has earlier worked with America’s CALPERS, one of the largest pension funds in the world, says it had about 10 percent of its assets in private equity because returns in public markets were not always high. Typically investments were in more mature sectors and infrastructure.
Carew’s Northleaf Capital Partners is now managing more aggressive funds backed by the Canadian government which are investing in stage venture capital in a bid to kick start the industry in the country which was still undeveloped compared to the US.
The Canadian government had selected the firm to run the fund which mobilized multiples of private funds using a seed capital from the state which plays a loss-absorbing role.