Conversation with Jack Hennessy, Baring Private Equity Asia

June 2016

Real Estate partner Marcus Cutchey chats with the Managing Director of Baring Private Equity Asia, Jack Hennessy, about foreign investment, innovation and sailing lessons for corporate life.

MC Your role makes you uniquely placed to determine how receptive different countries are to investment and foreign capital generally. How does Australia rate, and is it an easy place to invest in?

JH Overall, Australia rates highly in terms of the legal infrastructure and enforcing shareholder rights and debt. This is mainly because Australia has a clear and easy to navigate legal system. Australia also rates highly for quality of management teams, corporate governance and good corporate behaviour.
If I had to mark Australia down, particularly over the last 10 years, it would be the lack of clarity around government policy on foreign investment. While this has not impacted us, we do monitor it very closely.
Also, with our investment in education, healthcare and real estate in the Asia-Pacific region we track current and proposed regulatory changes in those sectors in Australia. These days we find much less clarity then we saw 10 years ago.

MC There has been much discussion about creating a culture of innovation in Australia. How does Australia compare with other countries where you invest?

JH Throughout Asia-Pacific, except perhaps Singapore, Australia rates highly for innovation. But, the commitment to a culture of innovation is relatively new, although it is moving in the right direction.
Building this culture is a multi-decade process so we need to take a long-term view on building an ecosystem that creates that culture.
Despite the frequent changes of leadership in Australia, I hope they continue to commit to innovation as it will pay-off in the long run.

MC What have been some of the larger investments Baring Private Equity has made in the last two years?

JH Over the last two years the Asian economy has not been very strong so we have tended to be opportunistic during these uncertain times through significant investments in the outsourced corporate services sector. For example, we acquired a stake in a subsidiary of TELUS which provides high-end business process outsourcing services to international corporations; invested in Vistra, which provides outsourced fund administration and corporate trust services; and also invested in Solera, one of the world's largest insurance claims processing software companies.

MC What are your thoughts on the current state of the Australian economy? Are there specific sectors that represent value in Australia? What are the main risks facing the Australian economy?

JH At the moment, we are very cautious about anything to do with discretionary consumption in Australia. Instead, we are focusing on less cyclical sectors such as education, healthcare and real estate. We are already exposed to education through a global business we own as well as specialty healthcare, hospitals and medical devices.
A key risk for Australia is that wage inflation over the next 10 years will be less than the prior 10 years unless Australia can work out ways of increasing competition, innovation and productivity.

MC With your office in Singapore, managing staff in offices around the world, and a head office in Hong Kong, how do you manage the competing demands?

JH We have invested a lot in technology infrastructure with video conferencing across our offices and on our mobile devices. By leveraging technology we achieve the soft benefits of face-to-face communication while decreasing the amount of travel for our people. This is particularly important in managing a fund like ours where capital is very mobile and can be deployed across a broad geography.

MC As an experienced sailor, what lessons from your sailing experience do you apply to your corporate life?

JH The first lesson is, the fastest way between two points is a straight line. It's a good business principle to know where you want to get to and to head straight there.
Secondly, being successful involves loving what you do and enjoying doing it with other people who love what they do. I've learned a lot from my partners and I really enjoy being a value oriented investor.