Originally written as comment to Marc Gerstein's 11 March 2013 very good post on Busines Development Companies - seekingalpha.com/article/1264411-looking...)
Many family owned and controlled conglomerates in Asia are criticized for 'asset-trading'. But if viewed and analyzed like a private equity alternative perhaps they look better.
In addition to the obvious - local connections/network, inside industry knowledge and experience - local conglomerates are not subject to selling or listing an investment in the 7-10 years PE time-frame. Thus the PE fund is giving up the option to hold its investments past the life of the fund. To raise the next fund, there is a powerful incentive to sell by a given time; and forced selling is not a very good way to get top dollar.
Asian markets tend to be more volatile and less efficient than those in the US so putting a time-frame on selling could lead to diminished returns for investors. Thus the PE fund gives up the option of when it wants to sell. And options have value.
People like Li-Ka Shing and his Cheung Kong Holdings as well as many other family-run conglomerates, have done very well by retaining and acting on this 'option' at the right time.
Perhaps BDC companies have an advantage over PE funds as they also seem to have the option of retaining assets as long as they want. Would love to hear peoples thoughts.