UCL Asia is likely one of the most successful private equity firms in Asia that no one has heard of. The Hong Kong-based firm was founded by Peter O’Donnell and the late Tobias Brown, who previously helped manage the Asian investments of the British financier James Goldsmith. Over the years, the firm has backed a number of successful companies in the region including Compass Technology, Noble Group, Zee Telefilms and Singer Asia.
The firm generally keeps a low profile but I came across a short article in FinanceAsia published in 2002. That write-up is available here and, although dated, contains some useful insights on how to think about investing.
Below are a few notes (includes some direct quotes from the article):
On investment strategy: UCL seeks to “pinpoint uniquely talented individuals who can execute a business plan and then create the financial structure to support them.” More simply put, the firm looks for good businesses run by insightful managers that can compound for long periods of time. According to Brown, companies that have “an extra insight or can deliver a top product or service can quickly evolve into businesses of real substance” due to the rapid evolution of Asian economies.
On mandate and approach: UCL has a flexible approach to investing with no constraints in term of size, type of deal or sector. The firm has made investments for as little as US$1 million all the way up to US$25 million (~10% of their capital base at the time the article was published). In the words of O’Donnell, “our entire goal is to compound value.” UCL is also set up to move fast and without bureaucracy. The firm has no analysts or associates, so investee companies deal only with the firm’s principals. Brown says “our approach is very hands-on and very focused. We don’t believe in endless layers between us and our companies.”
On generating ideas: UCL develops its own investment insights, many of which run counter-cyclical to the prevailing investment themes of the day. The firm tends to focus on sectors that are out of fashion and seeks to back management “that have the guts to act on years of industry experience to take advantage of an unusual opportunity.” An example of this was their investments in the chemical sector during the dot-com era because valuations were cheap coupled with strong growth prospects and excellent management.
On structuring investments: Unlike traditional private equity investors who will only invest if they can assume a controlling stake in an asset, UCL prefers minority stakes (their sweet spot is ~25%). According to Brown, the firm focuses on structuring deals such that “the entrepreneur is encouraged to protect the downside and go for the upside.” The principals like to have a voice in the business, however, rather than just be a provider of capital.
On volume of activity: The team spend a lot of their time looking at different industries. Over the years, UCL has invested across a wide range of sectors including shipping, media, technology and natural resources. As per O’Donnell, however, “we only do two or three transactions a year, so we have a lot of time to look into these sectors and to see what and who makes them work.”