Buyout firms skeptical of bank advice

By Brian Kelleher, Asia financial services correspondent

HONG KONG (Reuters) - Securities houses are increasingly showering buyout firms with investment ideas but private equity players often shrug off that advice as they choose to source their own deals.

Investment banks reaped a record $458 million in fees from private equity firms in non-Japan Asia Pacific last year, according to Dealogic, prompting them to beef up their leveraged finance and financial sponsor teams, which cater to a range of buyout shops.

But while banks pride themselves on advice, their ideas often fall on deaf ears, particularly as conflict of interest issues loom around their own proprietary investment activity.

"I don't think we rely on deals from the investment banks," Chris Rowlands, Asia managing partner for UK-based 3i Group (III.L: Quote, Profile, Research, Stock Buzz), told the Reuters Hedge Funds and Private Equity Summit in Hong Kong. "The idea you're going to get a flow of proprietary ideas from investment banks is unrealistic."

Citigroup (C.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) and others have been hiring senior bankers to deal with private equity firms, which have raised a combined $32 billion for Asian deals last year, the Asian Venture Capital Journal said.

But financial sponsors, which prefer to work on exclusive deals, say investment bankers shop ideas to too many clients, as they are under pressure to close deals.

"We see lots. Lots is shown around, but it tends to be very unattractive," said Ralph Parks, chairman of Oaktree Capital (Hong Kong) Ltd. and the former Asia head of JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz).

CONFLICTS?  Continued...