Private credit has been a strong performer over the past few years. A Singapore-based single family office told AsianInvestor that some family offices prefer private equity investments to alternative investment opportunities.

Golden Vision Capital, an investment arm of a Singapore single-family office, believes that private equity is a compelling alternative, as it seeks growth rather than stability through its investments. Private credit investments are not their current focus.

“Investing private equity offers many advantages and is aligned with the entrepreneurial nature that families seek growth,” Riady Gozol, managing director of Golden Vision Capital told AsianInvestor.

“It is important to decide whether stability or growth is more important when selecting the instrument that you prefer,” said Mr. Webb.

The family offices focus is on investments in Southeast Asia, the US and globally via buyout funds. Growth funds and venture capital funds are also invested in.

Gozali said that the evaluation for private equity is very different. “For private credit the emphasis is on governance and the ability of the payer .”.

In private credits, the tenure is an exit but the upside potential is limited by the interest rates. This leaves only one major downside, default.

“If the family has a strong business, private equity is a great opportunity for investment. It gives them a solid foundation to understand business operations and enables them to apply principles that are common across different business types when investing,” he said.

UBS Family Office Report, 2024, also supports the preference of family offices for private equity over private debt. In 2023, in Southeast Asia, of the 36% allocated to alternative investments, 19% was private equity, compared to 3% private debt.

GOING DEEP

Private equity has a lower risk than private debt from a private capital perspective. If a company declares bankrupt, it must first pay its debts, which locks any equity-based capital investors may have invested.

For Gozali, however, private equity is a class of assets that goes through market cycles. This presents good opportunities for entry and for growth beyond stable returns.

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According to Gozali, there are also intangible benefits for family offices by being in this area.

“Investing in PE allows for family members to actively participate in the business world.” This engagement provides valuable experience and education, helping younger members of the family understand business operations, money value, and the challenges in raising capital,” Gozali stated.

“Engaging in startups and founders provides a hands-on way to learn about entrepreneurship and the development of businesses,” he said.

FOCUS AREA

Golden Vision Capital, which invests in private equity, is sector-agnostic, but has identified three areas that will grow over time, namely technology, health and consumer segments. Additionally, it is currently studying sustainability-related sectors, such as the green economy.

Gozali elaborated that technology can encompass many things.

“Here, there are two main areas to focus on. The first segment is the most innovative, and it comes primarily from developed markets. The second area focuses on digitalisation and, although it may not include breakthrough innovations, it is focused on using technology to meet the market’s demands, such as online booking platforms .”

The team is also exploring Artificial Intelligence, its application in fintech and health sectors, as well as consumer sector. Gozali said that AI has reached a “browser moment”, similar to the ease of accessing the internet after the introduction web browsers.

The family offices invests in companies that have passed the early stage. They are looking for growth capital and Series B and beyond.

“First, we evaluate the market potential and future growth prospects. We also evaluate the company, and in particular the team. We usually back leading companies who have already been through several rounds and have a proven business model with a clear road to profitability,” Gozali explained.

To overcome the knowledge gaps that arise when investing in new private equity sectors, Gozali recommends working with fund managers whose expertise is in the sectors that the family office prefers. This will provide focused knowledge and the expertise needed to make better investment decisions.

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“First, VC funds offer access to a broader array of investment opportunities as they have a diverse range of companies,” he said.

“Secondly, institutionalising the investments allows us to collaborate with investors who also invest in the same VC fund. This collaboration allows us scale up our investments, as we can pool resources with others investors to make larger investment in promising companies,” added he.