Allan Alicer of SofCap Partners Weighs in on Investing for Socio-Economic Impact in Southeast Asia

Besides investing on startups for profit, the goal must also be to create value and positive impact that will benefit the country, or better yet, the region. SofCap Partners is a private equity investment firm in the Philippines in the service of providing equity capital and management expertise to local companies.

Among the four directors of SofCap, Allan Alicer has over 11 years of experience in development banking, private equity, and corporate finance. He shares with TechShake the strong passion of SofCap in partnering small and medium-sized enterprises to disrupt traditional industries.

Tell us a brief background of yourself and your role in SofCap.

SofCap Partners is a local private equity firm that was established in 2019 by the managing director Evan McBride, myself, and two other partners, Karen Jimeno and Jaime Cuenco. We previously worked together in a private equity firm which had more of an industry-specific mandate but for us here at SofCap Partners, we believe in the growth story and strong fundamentals of the Philippines and are quite sector-agnostic.

I started out my career in development finance working under corporate banking and investment banking. I handled basically corporate loans and advisory work for public and private companies. After that, I joined Evan and the others in a private equity firm. We handled two main companies that were involved in logistics, shipping, real estate, property development, and then after my stint there, I served as the CFO of GCash.

Can you share with us how you began to establish SofCap in 2019?

There are a lot of reasons behind it but primarily we believe in the growth story so when you look at the fundamentals of the country, we thought that there was a gap in funding primarily for certain ticket sizes and primarily for equity. It's a story that you see all across Southeast Asia as well. I think a lot of institutional investors are flocking to Southeast Asia because of the large populations, rise in per capita income, and the demographic dividends that are present here that you wouldn't find or wouldn't be able to access in other regions in the world.

So we felt that we missed the private equity space, working together and we felt that it was a good time. We've been seeing a lot of activity as well from offshore private equity firms. Because of the opportunities and the perceived funding gap, we decided to just start our own.

In your opinion, what makes Southeast Asia an interesting space for innovation and tech investment or, in general, for the investment part?

Primarily there would be the fundamentals of the region as a whole, including the large populations, the rise in per capita income, and relatively high growth rates here compared to more developed countries or other emerging market countries. We also see a lot of other institutional investors being present here so that has a network effect, but it does have an effect in regard to the potential for exit, the potential for collaborations so I think that draws even more investors into the region.

Also, when you look at the state of the industries here in the Philippines and Southeast Asia, you can see that we're still lagging behind our counterparts. Like when you look at how developed China is or how developed the West is. It is only now that we are trying to catch up to all of those. So because of that, there's a lot of opportunities to disrupt these highly traditional industries and, of course, that's very appealing to a lot of investors because it means you get about average returns.

I think there's also this particular characteristic of Southeast Asian companies being family-oriented or there is a certain type to us that would also open up opportunities for succession, for digital transformation, because they have these legacy processes or practices that would benefit a lot from the adoption of new technologies.

Do you think it is more advantageous for the companies to adapt to the succession of the firm rather than give opportunities for other individuals?

I think there is no one-size-fits-all answer to all that. It’s a case-to-case thing because when you look at all of the practices that these firms already have, it might be a competitive advantage for them because maybe that's the basis for their market share, for example, or the relationships. It's difficult to tell without a specific company in mind.

But in general, I think you can see that a lot of these companies might be particularly labor-intensive or capital-intensive, and they're already these technologies that are available elsewhere that could widen your margins so I would look into those. The opportunities for that and how well it fits with the culture of that specific organization.

What type of growth companies do you want to see in SofCap and, as you've mentioned a while ago, you're agnostic but do you have any preferred industries, during this time or in the next few years?

For us, we look at deals across all industries, all growth stages, and different ticket sizes but were particularly drawn to those that have the potential to make a huge socio-economic impact. So we're attracted to deals in healthcare, education, outsourcing, food, and logistics, and, of course, fintech as well.

Aside from its growth right now what made you decide to have these industries to invest into?

It would be just how well these industries are positioned relative to the overall market environment and the macroeconomic trends that we're seeing. For instance, if you look at just the statistics of consumer behavior, you have internet users here in the Philippines already reaching very high growth rates, internet adoption is at 67% and you have roughly 75% of the population using the internet for 10 hours at a time. 

So you can see that there's growing adoption of technology and there's a growing willingness to use it, I think previously, that was one of the barriers here because, for example, GCash, have been around since 2004 began, but hardly seen anyone adopt it, not until the past 5 years. So it's also the timing of the opportunity. It's analogous to what we see in healthcare and education. 

I think the pandemic kind of accelerated some of those trends so there's a lot of potentials because of those trends and with e-commerce and fintech come logistics, so we think e-commerce will grow at a fast rate, and with that will come service fulfillment. Last-mile delivery. Just a lot of needed infrastructure remaining to support the growth of e-commerce.

In your view what are some of the most important trends in the private equity ecosystem in Southeast Asia this year? Do you see something as something attractive for investors this year?

In general, private equity as an asset class is very attractive to most institutional investors particularly long-term institution investors just because of its desirable return profile. If you look at industry reports, it's really the fasted growing alternative asset class and especially for Southeast Asia. I personally feel that it's becoming the next frontier for investment. It has been around but only recently have we been seeing how the fundamentals, the demographic dividends are leading to changes in consumer behavior, leading to more resilient consumer patterns and how we have the technology available elsewhere it just needs to be executed in this particular space so I think it's very well positioned.

With that being said, what is your outlook on private equity this year and beyond?

I think because the attractiveness of private equity in Southeast Asia, in particular, boils down to fundamental aspects that the long-term picture for the ecosystem is very good, it's very rosy. I think going into the pandemic, you see a lot of dry powder that's trying to chase deals that have accumulated over the past year, currently, so we'll see a lot of activity, maybe not in the near term but maybe next year or in the coming months but because we're still reeling from the effects of the pandemic, private equity activity this year will be relatively muted particularly in the first half of this year as investors are still adopting a wait and see approach so I think, particularly in the Philippines, investors would like to see how well we manage the crisis with the Covid-19 vaccines, how able we are to meet the forecasts of economists that we will pose a sharp recovery.

To know more about SofCap, you may visit their website