HarbourVest sees private equity assets growing

By Alison Tudor, Asia Private Equity Correspondent

HONG KONG (Reuters) - HarbourVest, which builds private equity portfolios for institutions globally, said it sees higher fund fees and climbing deal valuations in Asia, but expects clients nonetheless to clamor for regional exposure.

Over 25 years HarbourVest has put more than $15.7 billion into funds. Given the popularity of private equity investing in recent years, funds hold the upper hand when it comes to attracting new money and can charge more for their services.

"While we might yearn for the old days, where you could negotiate more aggressive fees from the investors' perspective, those days are pretty much gone," Philip Bilden, managing director of HarbourVest Partners Asia Ltd., the regional arm of the global firm, told the Reuters Hedge Funds and Private Equity Summit.

Industry-wide management fees of 2 percent of assets have held steady even as fund sizes balloon and performance fees creep higher, but that is changing as money floods into private equity.

Japanese private equity firm Advantage Partners recently hiked its performance fee -- or share of the investment returns -- to 25 percent, above the typical 20 percent, sources told Reuters last week ID:nT332876.

Minimizing exposure to the market cycle is also tricky given the rush into the asset class. In 2006, private equity investors bought companies in Asia to the tune of $67.4 billion, more than double 2005's total investments by the asset class, according to data from Hong Kong-based Asian Venture Capital Journal.

"Asia Pacific witnessed record deal activity last year, and investors generally will have high exposure to 2006 vintage deals. Investors should hope it proves to be a good year," said Bilden, adding that HarbourVest's portfolio construction ensures sufficient diversification by year of investment.

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