Warburg Pincus on US-China trade war, investing opportunities in Asia


Tensions between the U.S. and China might well drag on over the next decade, so investors have to learn to operate under such prolonged uncertainty, said the co-chief executive of private equity giant Warburg Pincus.

The world’s top two economies have engaged in a trade war that started a year ago as a tariff fight but later spilled into other areas such as technology. As the dispute dragged on, many investors and analysts have increasingly lowered their expectations for the two countries to find a quick resolution.

“There’s lots of debate about current trade negotiations and whether a deal happens or not. I think the broader view I have is that we all need to simply learn to live with it,” Charles Kaye told CNBC’s Nancy Hungerford at the Singapore Summit.

“We need to live with that uncertainty and the dynamics that there will be points of collaboration and points of contest, and hopefully none of those spiral into something that has somehow more negative dimension to it,” he added.

Returns in the era of uncertainty

Accommodating that new reality doesn’t mean having to accept smaller investment returns, said Kaye.

He added that China, despite being in the center of the trade war, could still offer investors good returns in the coming years. That’s because global growth will increasingly be driven by consumption in Asia, and China is “an important part” of that trend, he explained.

“If I look at what we do, it’s all really focused on that rise of the mass affluent. That rise of the consumer whether it’s in consumer, or logistics, or healthcare, financial services, real estate,” said Kaye.

“I’d argue (that) the kind of growth is becoming more and more relevant to the world, and yet it’s coming at the exact same moment that the conflict itself is rising,” he said, referring to the U.S.-China trade dispute.

Growing domestic consumer demand is one “core” theme that has guided Warburg Pincus’ investment in Asia over the last few years, according to Kaye. That’s even before the trade war disrupted global supply chains and prompted many investors to re-think investments in companies with production lines across multiple countries.

Listing isn’t the only option

Chinese giant Alibaba’s Ant Financial and Indonesian ride-hailing firm Go-Jek are among the firms that Warburg Pincus has invested in. The Asian region now accounts for 35% to 40% of the company’s footprint, with presence in China, India and Southeast Asia, said Kaye.

While one “ultimate” goal is for the firm’s portfolio companies to go public, Kaye said he realizes that there are now other options to raise money other than listing on a stock market.

“The number of … public companies in the U.S. is half of what it was 20 years ago,” he said, adding that in Asia, many capital markets are still “less mature” which may limit the ability of companies to raise funds publicly.

“The ability to raise capital at great scale is now something that can happen not only in public markets but in private markets as well,” he said.


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