Kasper Wichmann
Welcome to Balentic Edge. Today we’re joined by Eric Marchand, a partner at Collyer Capital, an independent private equity and venture capital fund manager based out of Singapore. Collyer Capital has a differentiated approach and a deep private equity experience. It helps reshape the investment landscape for LPs in Southeast Asia. Eric himself brings a rare blend of investment advisory and operating experience to his role at Collyer Capital. As partner, he leads deal origination execution,

Kasper (00:25)
drawing upon a track record built across private equity investment banking in roles at firms like Campbell Lutyens Unigestion CDC Group and GE Capital. Welcome, Eric.

Eric Marchand 
Thanks for having me

Kasper Wichmann
Eric, tell us a little bit about your own path. What led you into the world of private equity? How did Collyer Capital come to be?

Eric Marchand 
Sure. I’ll try to be brief on the past. I when I first joined GE as a young graduate, I went through all these management programs, but I’d always been attracted to private equity. And through thick and thin, I thought that building an operational background was probably the right thing to do. And with GE Capital, we could do both the operational side as well as the financial side. And then through these management programs, I just joined GE equity back in London, where I was managing the

fund-up, fund-up, co-investment portfolio for GE Capital, Europe’s balance sheet I did that for a few years, but unfortunately I did it through Lehman. And GE Capital, at that stage, post Lehman, decided to stop doing anything related to private equity. So I decided to leave. And then kind of serendipitously fell upon a job offering for CDC Group to cover Asia. And I had an interest in Asia, and I applied. And

10 to 15 interviews later, I got the job and I started investing in Asia 15 years ago. Mind you, CDC was one of the largest LPs at the time. And so I built really solid networks in India, Southeast Asia and China. But, you know, I was always tickled by the commercial side. when Unigestion came calling, I joined that team in Geneva at first and very quickly moved to Asia where both of us met.

and I was the head of the program across Asia Pacific until 2020 and then decided to leave to join Campbell Lutyens to have a bit of an experience on the advisory side before founding Collyer. So why did we found Collyer is very simple. Asia’s becoming complex and huge in terms of macro. I don’t think it’s valid to any longer look at it as just one allocation.

It’s a multitude of allocations, which is developed markets. Even you can single out Japan, but you could add Korea and Australia to that. It’s China. Now the question is whether you want to do China or not, but let’s take away the geopolitics. China is its own entity. India as well, because it’s becoming very complex in its own and a huge market And then finally Southeast Asia, which has never been a core focus for many people. But

Southeast Asia is becoming the fourth largest economy in the world by 2030, and therefore warrants a bit of a look. And even if you look at tariffs today and the World Economic Forum’s forecast, this region is going to grow over 4.5 % post tariffs per annum on average. And so if you want to allocate to Southeast Asia, you don’t have a cookie cutter GP you can back. There very good GPs in the region, but they each cover, I would call it subregions.

And so what we basically try to do is to copy exactly what’s being done in Europe, which is you can either take a one GP commitment across Europe and they do the job for you, or you do it in, you know, with several GP commitments across country or sub regional specialist. That’s precisely what we’re doing is offering investors a access product to Southeast Asia. do the work of finding the best teams in the region.

We supe it up a little bit with good secondary transactions to improve liquidity, to also get our primary program to compound, and then finally do co-investments to improve our total expense ratio. We’re not inventing anything. We’re just trying to deal with two things, geographic diversification, and volatility.

Kasper Wichmann
A very interesting strategy you guys are applying. It’s a great overview. But being candid, I think many, maybe in particular European LPs, they continue to overlook Southeast Asia, lumping in with sort of broader concerns about volatility and complexity in emerging markets. In doing so, are they missing out, on a really compelling growth story in private markets today?

Eric Marchand 
It’s the crucial question, is appetite for the region. What we’re not trying to say to people, and I think too many times in the past, people have oversold emerging markets as an alpha. But I think what people forget, you have to look at your return in terms of content. It’s growth of revenue, growth of earnings, multiple arbitrage and leverage. And you can construct a portfolio with

geographic diversification, so a bit of Asia, Southeast Asia, maybe Europe or the US, but also return driver diversification. And today, whether you like it or not, if you’re allocating to Europe and the US, you’re allocating to 75 % of levered driven returns, which can go both ways nowadays. There’s an entire debate on whether multiple arbitrage is levered driven or not. In the last 15 years, I would also add

that multiple arbitrage has been leveraged. So what you’re missing out is on diversification, on the fact that we don’t have much leverage in markets, that our companies are more resilient thanks to that. And the backdrop of this is that even if we can put more leverage, you’ve got GDP growth that well exceeds 4 to 5 % per annum on average.

I’m not saying to any investor, oh if you don’t invest in Southeast Asia, you’ll miss out on something amazing. You’ll just miss out on a differentiator on a return that is slightly de-correlated from global macro. And I think that is the real point. We looked at our portfolio post-liberation day. Only 1 % of our portfolio was directly exposed to tariffs. We’re not trying to say to people that it won’t have an effect.

But it’s not going to change the trend. And if you focus on investing in companies that are really dealing with internal growth and internal demand for product and services in Southeast Asia, you’re building a portfolio that is slightly de-correlated to global markets.

Kasper Wichmann
What you’re saying, if I paraphrase you a little bit, is this is part of a sensible approach to portfolio construction or should be for most LPs.

Eric Marchand
100%. if you don’t do Southeast Asia, then five to six years from now, you have to accept the fact that you’re ignoring the fourth largest economic block in the world. It’s your choice, but it’s a choice.

Kasper Wichmann
And start per-

Has this perception of Southeast Asia started to change? Has it evolved? You’re seeing a live right now. How are LPs seeing this and has it changed over time? Do they understand this?

Eric Marchand 
So.

It’s a really tough question to answer, but I’ll try my best. I was much more hopeful before April 2nd, because I think when people saw…

you know, volatility in developed markets. The idea of diversifying your return starts becoming slightly more appealing. And I was always telling people, you know, non-politically, Donald Trump was my best sales guy. What happened after April 2nd was I think a lot of people associated tariffs with manufacturing and therefore looked at ASEAN as one of the

regions suffering the most from that. And if you read the developed market press and respectable websites like the BBC, it seemed like very much doom and gloom because people had this perception that we had this Asian tiger, if you will, its development was solely reliant on selling stuff to the West. But if you look at the numbers, it’s not true. Manufacturing is only 25 % of the ASEAN economy.

exports to America are only 15 % of exports. So I’m not saying that it’s not going to have an effect, but there’s way more than that. And so actually we’ve made the effort to publish one paper just after liberation day. There’s another one coming up on Vietnam. We’re not trying to be smarter than anyone else. We’re just trying to show perspective is you invest in this region for the trend.

the tariffs are not going to change the fundamental trend. It might slow it down a little. So I’m hopeful that people will see this, I mean, it’s terrible to say this, but we do welcome this volatility in developed markets because it makes our speech that more appealing, particularly the uncorrelated one.

Kasper Wichmann
And when you say trend, I think we should be clear what you’re really saying is mega trends, because we’re talking about things like demographics, urbanization, GDP growth, consumer growth.

Eric Marchand 
100%.

The middle class in ASEAN by 2030 should be equal to the size of the US population.

It’s not the size of China, but it’s a significant size. And it will only be half of the total population. So it’s not only a trend that’s happening now, it’s also one that’s going to continue for the next 20 to 25 years.

Kasper Wichmann
I want to jump a little bit more into your strategy because it’s very differentiated as I see it. Not a lot of Fund of Funds players will pursue this, let alone the sort of more narrow geographic scope, even if it’s a large geography. What’s the strategic thinking behind the model you created and what are the advantages for the LPs in terms of maybe access or alignment or something else?

Eric Marchand 
So I touched upon the fact that there’s no proverbial pan-European like manager in this region. They’re mostly sub-regional. So by making a choice of a GP in Southeast Asia, you’ll necessarily make a choice on which countries you’re looking at. We’re trying to offer this diversification across the entire region. And there’s a reason why.

Because we studied where FX has gone over the last 20, 10, and five years. If you’ve invested equally in the six largest economies of ASEAN over the last 20 years, assuming no gain, just FX, you got in and get out at the same price, you’ve lost roughly 6 % over 20 years. Because the currencies of ASEAN counterbalance each other.

versus a rupee where you’re losing 2 to 3 % per annum. Over 10 years, you lose 20%. So then people tell us, oh, there you go. There is your emerging market gotcha FX loss. But actually the euro was minus 18 during the same period. And then finally, over five years, you’ve lost 4%. I will put a footnote. This has not been recalculated as of just now. But the point is the following.

Kasper Wichmann
That’s very interesting.

Eric Marchand
is the diversification in ASEAN offers you a FX, EMFX hedge. You still have a FX exposure, but it’s much more similar to, it follows the trend of the US dollar appreciating and depreciating. So that is kind of the construct behind this product is that the diversification offers you a hedge. And then the last thing is, that there’s been very good GPs in this region, but there’s been also very bad ones.

And been doing this for 15 years, we kind of know who are the bad ones, who are the good ones. And we feel that if you the market well enough, you can consistently pick the good ones. And if you do that in Southeast Asia, actually you’re delivering top quartile returns consistently.

Kasper Wichmann
Very interesting. Switching tacks again a little bit. Looking at Collyer. LPs, and you know that because you’ve been one for many years and you still are. We often look for the aha moment or a clear edge. What’s the edge of Collyer Capital going beyond the strategy? Because you could pound a niche strategy, but if I walk away from this, what’s the one thing you want me to take away about Collyer Capital?

Eric Marchand
I’m going to answer the question in two words and you’re not going to like the answer. It’s called insider information.

Kasper Wichmann
But my compliance

department may not like it, but I don’t have one.

Eric Marchand
But granted, it’s allowed in private markets, right? I’m not doing anything wrong. And I’ll explain with a very, very valid example. We did have a look at the infamous e-fishing deal in Southeast Asia that went horribly wrong, where you had a Temasek and the G42 soft bank, a litany of VCs and very, very institutional players.

Kasper Wichmann
Yeah, true.

Eric, dive a little bit into this one because I think our listeners, particularly in Europe, they won’t be familiar with e-fisheries.

Eric Marchand
was a great story. was a fish feed business that was really a domestic technology business growing gangbusters with amazing growth and profitability and had attracted a lot of capital. And what was nice about it is that it had a feel-good story to it because it improved the lives and the yields of fishermen

But very early on the CEO was misreporting the numbers. There were two sets of books. And this went on for a good seven years. But I’m telling you the outcome already.

We loved the business and I’ve been following it for years and you can imagine how attractive it is, particularly with all these institutions behind it. And we’re obviously not a big player in the market, hopefully yet, but we wanted to participate in a secondary. And we started by looking at the business. So everything checked out. However, we did a lot of referencing because we knew some managers that invested in similar businesses. And what came out of the referencing was the numbers don’t make sense.

So that number one, then when we referenced the partner with whom we were gonna invest with us, it turned out that the, we didn’t speak to the CEO, but we heard, we got a report back on the interview with the CEO. And our problem was they only wanted to do IPO and that kind of, in emerging markets, as you know, Kasper is an issue because it shows that, you know, there’s greed will be involved. And then the CEO had told,

the potential partner that the only way for him was an IPO. And that the rumors on the numbers plus this IPO only outcome made us back off because of our experience in Southeast Asia. And then two weeks later, literally, the news came out and the thing blew up and everyone has been literally wiped out. 300 million of investment.

So that anecdote is a ha ha. It shows you that if you do your homework, you can avoid these mistakes. I’m not saying we’re going to avoid all of them because it’s very difficult. But if you’re diligent, you have the right networks, you increase your chances of not making a mistake. And we’re thankful because imagine how do we allocate it to that deal just on the basis that we’re following the big boys because that’s the danger. Right. You want to be

Revelling shoulders as a young fund manager with the big boys. Had we paved to that, I couldn’t be talking to you right now because I’d be looking for another job. We’re fundraising and we have a write-off in our portfolio day one. so you have to be very, very careful. We’re very, very careful.

Kasper Wichmann
But this story and inside information, actually a great segue to another topic I wanted to touch on. That presupposes great people. So tell us a little about the people of Collyer Capital, because you put a small but highly competent team together. Can you give us a little bit of insights on how you work, what you do, what makes you special?

Eric Marchand 
So what makes it special is that you can’t invest without capital. So we’ve got a fund-raiser extraordinaire called Juan Figuero, who’s one of our co-founders, who, for better or for worse, is behind all this. He’s been in cahoots with a fund manager called Darién Tajeftón in Spain, and they started doing some work in Southeast Asia. And then Juan helped them.

put some capital into a first GP called Archipelago Capital Partners, the GP as well. And then as they did more work, Varianza asked them to do more into the region. They wanted to put more money and double their commitment to 20 million. And so what happened is that Juan went to see one of his very good friends who was called Mahir Hamid, who was the head of Actis So he was a direct investor in the entire region. And he said

should we launch this together in Mahir? And Mahir agreed, but he said, you need to find someone who knows what they’re doing. And he said, I might know that guy who was at Campbell Luton’s at the moment. So we had a conversation and, you know, my initial reaction was, know, fund of funds is an archaic product. It’s unfortunately lost its letters of nobility. However, in the right context, which is geographic diversification and volatility,

it works extremely well. But then we we complexified it a little bit with the secondary elements and co-investment to make it very, very attractive, we felt. so we’ve got a good fundraiser, we’ve got someone who’s done it before at Unigestion and CDC, and then we’ve got someone with really, really strong knowledge on the direct side, who brings that kind of direct investment experience, but we also needed an entity. And then we brought in Zen, who’s

Mahir’s cousin, who had started a company called Collyer, had a license, So we all banded up together. And Zen brings a different type of thinking. He’s done a bit of infra. He’s done commodities. So it’s a bit of a mix and a blend of ways of looking at things. And I think

It also gives a lot of dissident views. Like you’ll have someone like me who’s highly institutional that will see things this way because this has always been done this way.

Kasper Wichmann
Your

polo gives away the institutional part there, Eric.

Eric Marchand 
Yeah, but what I’m trying to say is that, you know, I’m always very cynical. I’ve always been, but that blend of not only having institutional guys in the team gives a really fresh look. And our discussion I see is what we try to do is we record them all. And it’s quite, if people would watch them, and investors can because we make these available. Sometimes you know, use them.

the wrong language, but people would see, you know, very, very deep discussions on topics that I was not used to talking about in my ICs because I have to explain things. And also we’ve invited our anchor. So the LPs have a representative on our IC. So that, and, you know, and then we brought in a senior resource for more operational stuff. But yeah, it’s an interesting group.

Kasper Wichmann
That’s very different.

Fair point. Sort of getting to the end of this, but we have time for a few more things. Where are you seeing the most compelling opportunities today? Sector, country, deal, type think this is something that our LP listeners are particularly interested in.

Eric Marchand 
For me, I won’t talk about sector because I think there’s just a lot of very, very strong sectors in the region. I think each country has a specific attraction, right? Things are changing a little bit because of the tariffs.

So we might have wanted to do a little like a 10 % on the geopolitical rebalancing of the manufacturing base, probably not today. But what I really think is a great opportunity is there’s a graduation of a lot of VC deals into the growth capital arena. I think a lot of these VC players are now trying to focus really heavily on improving unit economics of their businesses.

I might say, finally. And if they achieve that, a lot of these VC portfolios are still not going to exit, but they’re going to have increasingly a larger number of profitable growth companies in them. And so that brings a huge amount of potential growth capital deals for the GPs that we invest in, because that’s where we focus, is profitable companies. And on the secondary side, it enables us to structure deals where

we’re actually not taking a VC risk, but a growth capital risk, offering liquidity to investors that are potentially a little bit tired, having been there for 10 years. But you’re actually looking at a portfolio of extremely healthy companies where they’ve been more responsibly managed over the last two, three, four, five years. So I’m really, really positive on the transformation of our market, which has been way too VC focused.

It went from zero to 100 within five years. A decade ago, there was 2 % of VC in the region. Now it’s 50% in terms of AUM. It needs to rebalance, to normalize. And I think that normalization process is going to be the huge benefit of people that are focused on growth capital. And they’re not that many.

Kasper Wichmann
So that’s a positive side. What then keeps you awake at night?

Eric Marchand 
the dozens of the e-fisheries around the market. It’s very simple.

Kasper Wichmann
So being able to avoid them.

Eric Marchand 
Yeah, that’s, you always hesitate. And that the biggest problem with the e-fishery, it’s not the e-fishery itself. It’s now every time you’re looking at a successful VC deal that’s doing well, that’s profitable. You’re like, it really, really makes you hesitate even more. So that’s what keeps me going.

Kasper Wichmann
Eric, thank you for joining us and giving us an inside look at Collyer Capital and opportunities in Southeast Asia. It’s been really enlightening in terms of the opportunity that’s out there, also the pitfalls you need to avoid and what LP should be thinking about, an overall fascinating conversation. For our listeners, you’re welcome, Eric, it’s a pleasure to see you as always. For our listeners, you can learn more about Collyer Capital and connect directly with them on the Orca platform.

Eric Marchand 
Thank you.

Thank you very much for having me.

Kasper Wichmann
And Erik and everyone else, thank you for joining us on this episode of Ballantic Edge.