Allan Alicer of SofCap Partners Weighs in on Investing for Socio-Economic Impact in Southeast Asia
Aside from earning profit, the goal of investing is to make a lasting contribution to the country. This reflects the mission of SofCap Partners, a private equity investment firm in the Philippines in the service of providing equity capital and management expertise to create value and positive impact in the country.
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 his strong passion in partnering with small and medium-sized enterprises to support national development.
Tell us a brief background of yourself.
I began my career in development finance handling corporate accounts, loan arrangement, and advisory work for public and private companies. I then joined a foreign private equity firm that had investments here in the Philippines in the sectors of logistics, shipping, and property development. Afterwards, I served as the CFO of GCash where I oversaw the company’s corporate finance, treasury, and accounting operations and was involved in some partnership projects.
Can you share with us how you began to establish SofCap in 2019?
SofCap was established by its four partners: Evan McBride, our Managing Director; Karen Jimeno; Jaime Cuenco; and myself. There are a lot of reasons behind its formation but at the root of it, we all had a strong belief in the growth story of the Philippines and the role of patient capital in economic development. We also believe there is a funding gap that constrains the ability of some companies to realize their full potential. It's a story that resonates across Southeast Asia and other emerging economies.
In your opinion, what makes Southeast Asia an interesting space for innovation and tech investment or, in general, for the investment part?
A lot of institutional investors are flocking to Southeast Asia on the back of a common underlying thesis: the strong macro fundamentals of the region as a whole, its large populations, rising per capita income, and relatively high growth rates. You see a positive feedback loop at work where, as more capital is deployed in the region, more investors are drawn by the level of investment activity. This further opens the door for other investors that may have had reservations due to concerns on liquidity. And, of course, there’s the diversification benefit for the larger institutional investors.
Diving deeper, certain sectors in the region still lag behind its counterparts in more developed markets. For instance, consider the value that digital transformation can unlock for traditionally run businesses.
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?
Family-run businesses which are quite common throughout the region, have both strengths and opportunities. On one hand, such businesses may have very strong corporate cultures that have proven to be effective and resilient over generations. On the other hand, there are businesses that look for outside help to professionalize legacy systems and go head-to-head with newer, more agile competitors.
Ultimately, I don’t think there is one approach that is optimal across all situations. Context is key. But it is beneficial for all companies to continually assess and benchmark their practices against their peers to see if there is a better way of doing things.
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?
We are interested in the growth story of the Philippines, so our mandate is quite broad, but we do feel that some industries – owing to market trends, legislation, and impact potential – are particularly attractive. These include healthcare, education, outsourcing, logistics, and energy.
Aside from its growth right now, what made you decide to have these industries to invest into?
We take a very holistic investment approach to evaluating potential investments: we try to get a sense of where the market is and where it’s going, and why a particular company would be well-suited to take advantage of the opportunities in its environment. The pandemic has accelerated some trends and curtailed others. 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 a day. I find that the impact of these changes in consumer behavior is particularly interesting for certain industries, like healthcare, education, and logistics.
In your view what are some of the most important trends in the private equity ecosystem in Southeast Asia this year?
A lot of institutional investors are allocating a larger share of their portfolios to Southeast Asia, with good reason. This has to do with the macro factors I mentioned earlier: the region is in a demographic sweet spot and is expected to account for a fifth of total global population by the end of the decade, risk-adjusted returns are comparatively high, and the investor community is active and growing. Services that are highly relevant to the lifestyle of today’s consumer, like e-commerce and last-mile delivery, capture a lot of attention.
With that being said, what is your outlook on private equity this year and beyond?
I expect investment activity to remain relatively subdued in the very near term. Investors will be assessing how well the Covid-19 crisis has been managed as well as the long-term systemic effects that the pandemic has had or will have on each market. That said, we are already starting to see signs of recovery and renewed investor confidence. Southeast Asia – and the Philippines, in particular – has emerged from crises and has proven its resilience many times before. Taking the long view, there is a lot for investors and founders to feel optimistic about.
To know more about SofCap Partners, you may visit their website http://www.sofcpartners.com/.