ASIA NEWS: The big Zulkoski


Robert Zulkoski, the Singapore-based investment veteran, is back in building mode.

After leaving Los Angles-based private equity giant Oaktree Capital Management last March and taking a short break, he has been busy creating Laurasia Capital Management, an alternative assets investment firm that smacks of venture capital. During the first quarter of 2012, Zulkoski’s brain-child already has lined up financial backing and has committed to its first investments. “What Laurasia does doesn’t exist in Asia,” he said. “It’s never been done here before.”

The vision for Laurasia is bold, Zulkoski admitted to PERE in an exclusive interview. Via a strategy of sponsoring investment management businesses, initially in real estate, special situations, agricultural and clean technology, he expects to grow assets under management to $5 billion within five years. By that point, the firm, which is expected to be funded by high-net-worth individuals and institutions through a corporate issuance of private shares, will be quoted publically on one of the Asian stock exchanges – “part of the evolutionary approach,” he added.

The genesis of Laurasia comes from almost a year of ‘beta-testing’, including several consultations with US institutional investors. The central takeaway, Zulkoski said, was there are numerous investors that want to access Asia’s alternative assets and like many of the investment teams active in the region. However, because these teams lack the pre-requisite fiduciary processes and controls, they cannot commit capital to these groups.

They have to believe the Laurasia pie will grow more rapidly and become more valuable than a single-silo management company. Secondly, they have to believe they can get into the equity of the multi-silo business faster than if they joined one of the global firms
Robert Zulkoski

On the other side of the equation, there are “alpha” investment teams either leaving existing sponsors as they seek more independence or that have been orphaned for reasons tied to the global financial crisis, such as prohibitive new regulations. Zulkoski said these platforms recognise the requirements of the investors but, cognisant of the cost of implementing them, coupled with what investors are willing to pay for their services, they’ve found the math doesn’t work.

“Our primary business is to bridge the gap between investor expectations and the ability of local managers to meet those expectations,” Zulkoski said. Laurasia, the parent company, would provide financing, accounting, risk management, compliance and investor reporting functions, as well as a network of “in-country resources” manned by a dedicated country head, so its fostered platforms can become more viable investment propositions for sophisticated capital sources. “Our business model is designed to mitigate, if not eliminate, today’s investor concerns,” he added.

Crucially, firms that sell to Laurasia also would have operational costs assumed by the parent company –components like salaries, office space, capital for roadshows and fund construction – as well as the GP co-investment. Pointing to two hypothetical types of GP co-investment – 2 percent from a team and as much as 20 percent from large corporate sponsors – Zulkoski said: “Our GP co-investment will be somewhere in between.”

The rub

The price for all this support is becoming part of Laurasia, both corporately and economically. Zulkoski said of the latter component: “All these management firms that come aboard will not only be compelled by the economics as it relates to their own investment strategies, but they’re also going to participate in the development of the enterprise value of Laurasia itself.”

Zulkoski continued: “They have to believe the Laurasia pie will grow more rapidly and become more valuable than a single-silo management company. Secondly, they have to believe they can get into the equity of the multi-silo business faster than if they joined one of the global firms.”

Targeted platforms should be able to demonstrate an enviable investment track record, deep market roots, deal flows and existing investor followings, Zulkoski said. They should have tight, country-specific strategies and be incentivised principally by carried interest and not management fees. “There’s a venture capital aspect here, in that we ourselves are a start-up and we are facilitating the start-up of other platforms. Still, the majority of the teams we’ll be sponsoring already exist and have existing track records, often bringing AUM with them.”

All these management firms that come aboard will not only be compelled by the economics as it relates to their own investment strategies, but they’re also going to participate in the development of the enterprise value of Laurasia itself
Robert Zulkoski

At press time, Laurasia had committed its initial capital to four underling fund managers, including one real estate platform in Japan. Zulkoski declined to reveal the extent of its own capital resources or how much it agreed to pay for these businesses, but he noted that each platform typically should cost between $25 million and $40 million, including the GP co-investment. A further two real estate managers in China currently are being evaluated.

Zulkoski has a reputation for building fund management businesses in Asia, and Laurasia, while still clearly a work in progress, already is tangible – a five-strong executive committee and offices in Beijing and Tokyo are up and operational. His four-year spell at Oaktree occurred after he sold his previous start-up, Pangaea Capital Management, a special situations fund manager that he grew to more than $2 billion in assets under management. Prior to that, he built Colony Capital Asia, the local chapter of long-established Los Angeles private equity real estate business Colony Capital, from a one-person, one-office outpost to a 150-staff, six-office operation with, again, more than $2 billion in assets under management.

This time around, however, Zulkoski’s plans are bigger and bolder.