PERE ASIA ROUNDTABLE 2010: Sino watching

Events in China’s economy increasingly are rivalling those in the US, according to this year’s roundtable participants. Still, they are more preoccupied with how the investor community at large is eyeing their industry. PERE Magazine December/January 2010/2011 issue.

For the past two years, PERE roundtable participants have felt obligated to temper their optimism about Asia’s growth story with less-encouraging economic events transpiring in the West. And with this year’s roundtable taking place one day after the US Federal Reserve announced a second attempt to resuscitate America’s flailing economy, it seemed the trend might continue.
Indeed, news of the Fed’s plan for an additional $600 billion in quantitative easing, dubbed QE 2, would have caused serious ripples last year. Not so this year, as the participants are more conscious about China’s economic policy.

“The amount of money the US government is pumping into the system potentially has negative consequences for all of Asia’s markets, specifically China,” says Richard Price, chief executive officer for Asia at ING Real Estate Investment Management (REIM). “But if you boil it down, what happens to China is really going to drive what happens globally. If the Chinese economy falls out of bed, then all bets are off world-over.”

A check of global stock markets that morning showed Hong Kong’s Heng Seng rose 1.4 percent, closer to Shanghai’s SEE rise of one percent than the S&P/TSX Composite’s rise of a more sizable two percent. Rong Ren, chief executive officer of China-focused Harvest Capital Partners, says these reactions to the US stimulus demonstrate just how Hong Kong, traditionally an economic sentiment conduit between the West and East, is now more closely pegged to Shanghai than New York. “People are realising that Asia’s economies are now more closely aligning with each other,” he adds. “You cannot divorce the East from the US, but the impact from the West is becoming smaller.”

If the Chinese economy falls out of bed, then all bets are off world-over.

Richard Price, ING REIM

These macroeconomic insights kicked off a discussion of the most pertinent topics and issues relevant to the private equity real estate industry in Asia today. Price, Ren and a third participant – AXA Real Estate’s global head for Asia, Frank Khoo – discussed investor appetite, investment trends, financing and real estate market fundamentals, all of which the US would barely figure into again. Instead, the one country firmly melded into their narrative montage of insights, anecdotes and metaphors was the People’s Republic of China.

Chinese takeaways

Ren describes global reactions to Chinese exports, a traditional barometer for the health of the country’s economy, to underline his point. “When Lehman Brothers collapsed, China’s government was nervous about the effect on exports to the West,” he says. A member of China’s Central Bank committee at the time, he recalls: “They questioned whether people would still buy China’s products. One quarter later, customs office data showed exports had increased 22 percent. At first, they thought it was due to pre-collapse orders, but a second quarter then a third quarter passed and they realised everything was just fine.”
Ren says similar sentiments were expressed after Greece’s debt crisis this year. “By the end of last quarter, exports to the Eurozone had increased by 34 percent compared to the quarter prior to the Greek crisis.”

Nobody at the table would say China has or will decouple from the US. But with policymakers in Beijing wheeling out measures to stem growth while their counterparts in the West introduce stimulators, all are convinced they are in the right region to ply their trade.

Even though real estate sits centre in China’s efforts to cool its economy, each participant maintains that the country remains firmly at the centre of their firms’ long-term investment strategies, even if the distress currently evident in Japan’s market requires more immediate efforts, as is the case for Price and Khoo. Indeed, each of their firms is in the midst of a fundraising strategy for investment vehicles primed to capitalise on China’s nine percent-plus annual growth story.

Harvest Capital Partners, a 40-person China-focused private equity real estate firm majority owned by state conglomerate China Resources, is furthest down the line. Having grown to $2 billion in third-party equity and $3.5 billion in assets under management since inception, the firm currently is at the threshold of a new chapter in its five-year history. With just 10 assets on its books currently, having divested the majority of the real estate from its first three funds, Harvest is close to closing on a combined $800 million for two China shopping mall funds.

AXA, meanwhile, is at a more nascent stage of fundraising with its partner, Chinese insurance giant Ping An. Aiming to corral more than $500 million from investors, the real estate investment management arm of French insurance giant AXA brought a fund to market in July of last year with the intent of investing in Chinese residential developments.

ING REIM also started marketing a Chinese residential fund last year, hoping to attract up to $750 million from investors, although these plans have since been placed on hold until its corporate future is determined. The firm currently is subject to a strategic review by its parent ING. At press time, PERE understood that a shortlist of bidders to acquire the €71.1 billion global platform had been devised.

Regardless of the positions of their respective China funds, the roundtablers are in agreement that China must play a central part in their investment strategies. Furthermore, they aren’t perturbed by media noise about bubbles, particularly in the residential sector.

Earlier this year, Bloomberg reported record prices in China almost on a monthly basis. In March, for example, it said house prices across 70 Chinese cities rose 11.7 percent from 2009. Haikou, the southern city, saw a staggering 53.9 percent increase in some instances. Price doesn’t dispute the existence of steamy valuations, but he suggests most reports don’t examine all markets across the 9.6 million-square-kilometre, 22-province nation.

“I’ve heard of apartments going for $23 million,” Price says. “Those apartments are overpriced, but it doesn’t mean there’s a bubble. We spend an awful lot of time analysing data to really understand supply, demand and structural drivers, and China’s markets will largely remain very robust for as long as we can forecast.” Listing pent up demand from decades of no housing market and changes to Chinese material aspirations and familial structures, he argues that the structural fundamentals for a compelling investment case remain firmly in place.

An increasingly affluent middle class has driven housing prices up, causing the government to introduce a raft of cooling measures to stem inflows of speculative capital. Policies affecting everyone from buyers of second homes to state-owned enterprises are now in force, but Ren sees differences between 2010 and 2008, when the last raft of policies were introduced. “In 2008, transactions dropped by 60 percent and prices by 50 percent. This time, transactions dropped 60 percent and prices in most cities dropped 10 percent, although they actually grew by five percent in Beijing.”

It won’t be long before transactions increase again and, given how the country’s swelling affluence has been outpacing housing prices, it’s easy to be confident of that. Property services firm DTZ reports nominal household income across China’s seven key residential markets has grown 11.4 percent on average annually over the past decade relative to an average house price growth of 5.4 percent over the same period.

The core of the issue

With China’s macroeconomic prospects undisputed, private equity real estate funds have nonetheless faced uphill struggles to attract international capital. Indeed, this year PERE recorded just shy of $1.5 billion raised specifically for China strategies, including Harvest’s $800 million. Other firms that closed on international capital for China included Gaw Capital, Winnington Capital and Perennial Real Estate, although pan-Asia funds with strategies that include China have attracted international commitments. Firms falling under that heading include Aetos Capital, Angelo, Gordon & Co and The Carlyle Group.

Such a paltry amount seems, on the face of it, without reason, and this notion is underpinned when you consider many institutional investors are actually increasing their real estate allocations to Asia, based largely on the growth stories of countries like China. But Price says investors are no longer simply accepting macroeconomics and 20 percent-plus IRRs/2x equity targets in isolation, and requests for ground-level real estate data have increased exponentially.

Applying the issue across Asian markets, Price says: “It’s very difficult for them to invest when they don’t know the basic facts about a market: size, return, volatility and correlations. Except for Australia, that data and history is lacking when it comes to Asia property.” As a result, allocators sold on a fund are increasingly finding it tough to convince their superiors to sign cheques.
Khoo agrees: “Even when we try to get our insurance business AXA to support our products, they want to understand risks and volatility, and it’s tough for us to give them a number they can compare with other asset classes. Investors are now concerned not just about returns but risk-adjusted returns.” He adds that, despite allocations for Asia rising in recent years, investors nonetheless remain cautious on filling their allocations immediately. Even for smaller cheques of $25 million, authority is now sought higher up an institution’s hierarchy than before.

“Before the crisis, investors were more prepared to buy into a theme,” Khoo continues. “Today, selling the theme is not good enough. Investors today are far tougher on due diligence, opting to go for more regulated products. Unfortunately in Asia, there aren’t as many regulated products.”

Ren offers: “I have seen US pension guys come here saying, ‘I love the property, but I can’t present it without third-party information.’ One LP even considered commissioning a university to provide it.”

Compounding the issue is a flight to core property in many would-be LPs’ home markets. The latest Emerging Trends report from the Urban Land Institute and PricewaterhouseCoopers suggests 43 percent of all equity targeting the US is eyeing core and core-plus properties, while European non-listed funds body INREV found core products absorbed a whopping 87 percent of all capital raised last year for the continent.

This trend increasingly is applying to Asia too. In September, INREV’s Asia affiliate ANREV reported a similar sentiment in Asia, traditionally considered an opportunistic region, with 40.8 percent of all funds seeking to adopt a core strategy.

While a slide down the risk curve is understandable, particularly given the dire vintages of 2006 and 2007 of which Asia is hardly exempt, the problem with seeking out core real estate in the region is there really isn’t much that can be regarded as institutional quality. Sure, the introduction of market participants such as Chinese insurance companies and, perhaps shortly, REITs into places like China will help create core markets of scale. But the reality today, the participants agree, is that Asia’s limited core universe has different characteristics than what many institutions can reckon with anyway.

“In Japan, the market has depth and breadth, but you need to put leverage onto core and tenancies are short,” Khoo explains. “In Australia, you don’t need much leverage, but the market doesn’t have much length or breadth. In Europe, you can buy core with long leases, good tenants and not need as much leverage. That’s obviously more appealing.”

Price chimes in: “It’s also a matter of market maturity. Even in Japan, with a longer history than the rest of the region, there’s no history of institutional investment ownership. It’s the same with Hong Kong; the developer builds then never sells.”
The same brush

AXA’s Khoo suggests the dire performances of rival platforms are another reason for minimal fundraising by private equity real estate platforms of late. Fearing his firm and others like his have been tarred with the same brush as those that have performed badly, he says: “Some LPs invested in pan-Asia funds that unfortunately didn’t do so well. We present to them and they tell us, ‘We like your product, but we can’t present it to our committee because we’ve had a bad experience before and it’s still fresh in their memory.’”

A key complaint logged by LPs following recent disastrous vintages has been about alignment of interest between themselves and their GPs in terms of co-investment. But Price counters this. Pointing to the platforms managed by the global investment banks, arguably the practitioners most scrutinised, he says: “The alignment structures were there, even in the biggest funds that blew up. The poster child for global opportunity funds is MSREF VI, which I believe had to write down 90 percent of its equity. Right across the board, the entirety of Morgan Stanley Real Estate from the CEOs to the research guys had their personal money invested, and there was balance sheet money in there too. Nobody can argue that Morgan Stanley wasn’t aligned.”

The investment banks were heavily criticised for leveraging too many fee streams from their real estate investing platforms. Khoo believes LPs need to distinguish between ‘brick and mortar’ fund managers and financial engineers, the latter most associated with investment banks. “Obviously, we’re all affected by the crisis, but we weren’t hit as badly as those relying on financial engineering.”

Price intervenes: “Not that I feel the need to be an apologist for the investment bank platforms, but there’s no necessity to throw everything out, labelling it all bad.  Those types of investing come with their own risks. Those investing in these funds have the ability to underwrite their risks. I think there is still a role for these kinds of strategies.”

Arguably one of the most significant events of the year was the agreement by Bank of America Merrill Lynch to pay the LPs of its $2.65 billion Asian Real Estate Opportunities Fund a settlement valued at $650 million for actions considered non-fiduciary. News of the settlement, revealed first by PERE, shook the industry in Asia and globally as it was the first action of its type taken since the downturn. Now in the hands of The Blackstone Group, the fund is expected to return no more than 70 cents on the dollar, according to market sources.

None of the participants would explore the intricacies of the case, but each feels it is unlikely that mutinous LPs will band together and bring similar actions against managers elsewhere. PERE suggested the events surrounding the settlement were somewhat particular to the time when Bank of America and Merrill Lynch merged and perhaps therefore an unfortunate victim of circumstance, despite the fund’s poor performance. Indeed, Price agrees, adding: “I can certainly imagine that, if there was gross negligence or outright fraud, the settlement would have been a lot higher.”

Speaking generally, Ren nods to Price’s insistence that financial engineering still has its role, but he adds: “It is more important to put your heart to work, instead of examining the documents trying to find a little extra income here and there.” Regardless, Price notes that ING REIM traditionally has behaved like ‘boy scouts’ when it comes to leveraging fee streams from its platforms and, as such, can only offer an outsiders’ perspective on the matter.

Finishing on alignment, Price suggests there may be no absolute solution. “When the investment management firm also is a significant investor in the fund but then has different objectives, timelines or business rationale and ultimately pays the managers’ pay cheque, then there potentially are two masters to serve,” he says. “By nature, commercial enterprises’ investment horizons are different to those of pension funds, sovereign wealth funds and life insurance companies. You can almost argue that significant co-investment is a misalignment.”

Khoo suggests: “Just as the LPs do due diligence on GPs, the same must happen the other way around to get like-minded people in the fund.”

Foot shooting

This year has seen the face of the private equity real estate landscape change considerably, thanks to numerous mergers, start-ups and spin-outs, and Asia has been no different than Europe and the US in that respect. With the pendulum of power firmly swung in favour of LPs, Price, Ren and Khoo are seeing a price war on fees transpire, and the fight is largely coming from start-ups.

Each can regale with anecdotes of first-time fund managers offering fees well below the traditional two-and-twenty structure offered by many firms. In addition, most are asking for back-ended promotes. The roundtable participants believe such firms potentially are shooting themselves in the foot in their quest for market share by charging unsustainable fees.

Even worse, Price fears this could lead to an expectation among LPs that such fee structures become standard, which could damage the sector. “I’m a big proponent of portfolio-level incentive fees as a way to align interest,” he says. “But as a shareholder of a business, I could be the best investor in the market and then an event outside of my control wipes out the entirety of my profit. You need to be able to run businesses with sustainable operating profits.”

Ren counters: “To be balanced, some of the LPs achieved a poor result after paying lots of management fees. Looking at the layers of fees in some of 2006’s PPMs, you’d need a super computer to calculate those. I mean, they were layered on differing benchmarks.”

Despite that, Ren can recount instances during Harvest’s most recent fundraising campaign of investors caring far more about fees than strategy. “A 0.5 percent savings on fees will have an impact on your IRR of a fraction of a percent,” he argues. “Is that so important that you’re willing for me to cut staff for this fund?” Price adds: “That would have a serious impact on the results of the fund itself.”

Khoo agrees, emphasising that this is a people business. “You’re only as good as your staff,” he says. “Not paying staff enough will make them go elsewhere. LPs must realise this.” In addition, he notes that he increasingly is witnessing more transparent fee structures on the table, with more of an emphasis on fees paid on invested capital.
Declining dollar dependence

To be balanced, some of the LPs achieved a poor result after paying lots of management fees. Looking at the layers of fees in some of 2006’s PPMs, you’d need a super computer to calculate those. I mean, they were layered on differing benchmarks Quote Here

Rong Ren, Harvest Capital Partners

Much of the participants’ investor concern revolves around international capital, but such worries soon could become immaterial as domestic capital becomes increasingly relevant.  “The emergence of domestic capital sources means we become less dependent on [international investors] for our business models,” Price says. “If we want to continue to help our clients build their Asia allocations, we will all have to accept that to be competitive we must appreciate what domestic capital is willing to pay for assets and realise we no longer have an advantage by supplying capital. These markets are no longer capital starved, so you can’t expect to simply turn up with dollars and get a premium.”

One source of domestic capital in China currently evoking excitement is expected to come from Chinese insurance companies. In September, state regulator China Insurance Regulatory Commission (CIRC) ruled that the $670 billion sector could now invest up to 10 percent of policyholder capital into real estate. Previously restricted to investing via company capital routes, insurers are predicted to pump up to $100 billion into the sector over the coming few years, depending on which news source you read.
The CIRC published a three-page document detailing the investment parameters for Chinese insurers, some of which were clear and others less so. Of no doubt is that investments cannot be made into residential or development properties or development companies. What is less clear is whether the rule that up to three percent can be invested into real estate-related financial products includes private equity real estate funds or not.

Ren says: “The document sets out some clear parameters and lets the insurance guys figure out the rest.” He believes the more inconspicuous parts are likely to be determined on a case-by-case basis. But he warns that the market should not expect a wave of capital to appear overnight. Like international investors, they are exercising caution – albeit for wholly different reasons.

Regardless, Price argues that the insurers’ entry can only be regarded as positive. “Now, with the development of long-term capital sources like these, we have the beginnings of an institutional investment market, where people will buy quality assets for long-term income and capital appreciation purposes,” he says. “It’s great that the insurance companies are coming.”
Deal seekers

While investor matters dominate the roundtable, the participants are keen not to neglect talk of their day job, namely investing in opportune real estate deals. For Khoo and Price, Japan presents possibly the most compelling opportunity today.
AXA, close to holding a first closing of $200 million for its joint venture fund with Japan’s Sumitomo Trust Bank, aims to corral $550 million for Tokyo offices that Khoo describes as Grade A-. These are prime offices in central Tokyo, but they are of smaller size than the typical Tokyo skyscraper, many of which are owned by market stalwarts like Mitsui and Mitsubishi and are never traded.

Khoo argues that Japan is the best market for those seeking core-like investments in Asia. “On a cash-on-cash basis,” Khoo explains, “Japan is one of the most attractive markets globally”. AXA’s strategy is underlined by DTZ’s third quarter research, which states that the majority of the $4.7 billion invested into the market (a 25 percent increase quarter on quarter) were in lot sizes of less than $200 million.

Another area of opportunity in Japan for AXA is on the debt side. Lending today is “easier”, as Khoo puts it, but the banks remain cautious. As such, AXA is exploring the creation of a debt facility to supply senior debt to borrowers seeking to supplement existing senior loans.

Describing Japan’s lending environment, Khoo says things are still tight. “Previously, loan-to-value ratios were about 65 percent to 70 percent and last year that fell to between 40 percent and 50 percent, but now you’re looking at between 50 percent and 60 percent.” And although interest-coverage ratios have moved up slightly, banks are requesting more in upfront fees and are still only willing to provide small loans, typically up to $50 million. “We will not be competing with banks, rather we view them as a strategic partner, whereby we are working with them as part of a loan syndication consortium,” he adds.

All the participants admit that, given Japan’s social fundamentals – Japan’s population has been in decline since 2006, for example – and shrinking economy – growth of -1.2 percent in 2008 and -5 percent in 2009 – any investment strategy depends on market correction and seller stress or distress, thereby making this opportunity, by definition, temporary. As Price puts it: “Any underwriting in Japan that relies on growth just won’t make it onto the agenda. It’s about entry price and durability of income. I don’t think you can credibly make a case that you are likely in the medium or long term to see a reversion to normal in terms of risk-free investing and decent cap rate compression.” Much depends, he says, on relationships with Japan’s lending community, as loans are passed from performing to non-performing camps over the next few years and drive subsequent opportunities.

Memories of India

You’re only as good as your staff. Not paying staff enough will make them go elsewhere. LPs must realise this.

Frank Khoo, AXA Real Estate

India’s real estate is not high on the agenda for international investors. Perhaps unsurprisingly, it’s not high on the agenda at this roundtable either, but the participants agree, like China, its growth story cannot be ignored.
India’s Business Standard reported current GDP growth of 6.9 percent, lower than its Asia neighbour, but handsome nonetheless. But, as voiced at last year’s roundtable, the need for a series of ‘full-circled’ exits by private equity real estate funds, remains. “I want to see firms like ours go through the investment cycle there and make money,” Price says. “I’m currently not aware of any.”

AXA currently has an India strategy in incubation as it seeks a local partner to invest alongside it, an exercise that already has taken two years. Hinting that the firm is close to finding its bedfellow, Khoo says India’s drivers are similar to China’s – the growth of a middle-income population and urbanisation “Those drivers stay intact with or without the recent crisis,” he says, adding that India has withstood the downturn better than China because India’s GDP relies more on domestic consumption.
India policymakers, like those in China, have introduced measures aimed at reducing hot capital in its real estate market. Specifically, the Department of Industrial Policy and Promotion and the Ministry of Commerce and Industry passed a law dictating that foreign direct investments are ‘locked in’ for a minimum of three years. While this has angered some private equity real estate firms, Khoo interprets the ruling as a positive. “We are looking to do residential development, which means our capital is locked away for three years anyway,” he says. “This rule is India discouraging hot money but encouraging people who genuinely want to invest in India.”

Future trends

PERE went around the table asking for predictions on what will be discussed at next year’s event. The introduction of more restrictive policies is widely predicted, as Chinese and Indian governments remain concerned about speculative money flowing into their respective financial systems. In addition, increased attention towards sustainability and socially responsible investment is predicted. “A lot of our LPs, especially those from the Netherlands, are asking about this,” Khoo says.
Perhaps a surprise inclusion, however, was that of Indonesia as a prominent investment destination. Price says: “We’re actually working with a number of Indonesian institutions and conglomerates at the moment looking to invest internationally. The country has been off the charts since the Asian financial crisis, but it’s the fourth largest country in the world (by population).” Described by Price as a “hinterland” for Singapore, he predicts Indonesia’s steady, resource-rich economy will be beneficial for the Lion City and, as such, should appeal increasingly to international investors.

Such a “left-field” prediction, as Price coins it, coming true would indeed demonstrate to those outside of Asia that the region has far more going on than just China and Japan. For now, however, it is precisely those two countries that have dominated the thoughts of our roundtablers and indeed PERE’s headlines over the course of 2010. But then that in itself is a huge step from last year, when events outside of the region altogether took centre stage.

The Roundtablers

Frank Khoo, Global Head of Asia, AXA Real Estate

Khoo describes AXA Real Estate as the ‘new kid on the block’ in Asia, although he personally has extensive experience on the continent. He joined the real estate investment management arm of French insurance giant AXA from Singapore-based private equity real estate firm Pacific Star in September 2008. Since then, he has been busy devising four country strategies, namely for Japan, China, Australia and India.

Khoo introduced a system at AXA Real Estate whereby the firm teams up with powerful domestic businesses ahead of unrolling an investment strategy, as evidenced by joint ventures erected in 2009 with Sumitomo Trust Bank in Japan and Ping An in China. An India partner is understood to be in the offing, and it won’t be long before Australia is next.

AXA Real Estate currently has approximately $40 billion of assets under management. Asia constitutes a fraction of that at roughly $2 billion, but Khoo’s team, currently 15 staff and growing, is aiming to increase this to approximately 20 percent of total assets within the next four years.

Rong Ren, Chief Executive Officer, Harvest Capital Partners

China-focused Harvest Capital has been one of the few private equity real estate firms in Asia to have held successful fund closings in 2010. By year-end, the firm, backed by state-owned conglomerate China Resources Group, will have closed on approximately $800 million for a pair of shopping centre funds, namely the CR China Retail Real Estate Income Fund I and the CR China Retail Real Estate Development Fund I. These pre-seeded efforts are the latest in a line of funds launched by Harvest since its inception in May 2005 and will bring its total equity raising efforts to close to $2 billion.
In Ren, Harvest has a veteran China investment professional with a substantial background in real estate banking, having spent more than 13 years at such banks as Hypo Real Estate, where he was deputy chief executive officer of its Hong Kong business. He currently leads a team of 40 staff responsible for managing $3.5 billion in assets.

Richard Price, Chief Executive Officer – Asia, ING Real Estate Investment Management

ING Real Estate Investment Management is a firm currently at the crux of transition as parent company ING Group conducts a strategic review of the business, which could lead to its sale.  Any firm that takes over the platform could inherit a multi-division business with $96 billion in assets under management, $5 billion of which are under Price’s leadership in Asia.
Despite the goings-on at the corporate level, ING REIM in Asia has steamed on regardless in 2010, exiting a sizeable Korea portfolio at attractive returns, and has become something of a white knight for troubled Japanese real estate funds. Following last year’s appointment as replacement manager by the LPs of New City’s private equity real estate fund, the firm won a similar role as replacement manager of Creed Real Estate Partners’ Japan vehicle earlier this year. In addition to Japan, China remains a focus for the firm, which currently has grown to 100 staff across six offices.

Buffet confusion

When Harvest Capital’s Rong Ren described investors approaching Asia real estate commitments like a stranger to a buffet, the roundtable instantly understood his analogy. In the following exchange, the roundtable participants provide the context to that analogy.

Richard Price: Talk to sovereign wealth funds, even US pension funds. They have such large inflows; there’s capital to deploy. Their shortage, however, is product. With everyone moving from riskier assets towards core, they’re in a position where there’s more capital than product.
Rong Ren: You say they are looking for product, but when we talk to them we find out they don’t know exactly what they want in China, or Asia for that matter. It’s like they are at a buffet, and they don’t know what they want to eat.
Price: I think that’s right. The reality is, particularly for US pension funds, they still are recovering from the shock of poor performances over the past couple of years. They indeed are standing at the buffet today and are thinking, ‘Last time I had seafood, I got sick; last time I had desert, I got fat. All the outcomes were bad. I’m looking for something different to eat, but I don’t know what.’
Frank Khoo: To extend on that point, I think now they are at the buffet and are saying, ‘I’ve tried this and that, but here’s something I haven’t tried. I think I’ll let someone else try it first this time though.  If they get sick, I’ll know I made the right decision not trying it. If they don’t, I’ll try some myself.’ That’s what I’m seeing. I believe a lot of LPs will enter funds now on second closing.