From Engineer to Private Equity: How to Leverage Your Niche

19 Feb 2019
In this Funds Partnership Asia exclusive interview with Hareesh Nair, Managing Director at Fosun Healthcare Holdings, based in Singapore and responsible for investments across the Asia Pacific Region. Fosun is a Hong Kong listed multinational investment conglomerate, rooted in China, managing over $80B in assets. The Group’s investments into healthcare span across the whole ecosystem, from pharmaceuticals, hospitals, healthcare services, IT, medical devices and insurance.

Gain insights into how Hareesh leveraged his background to carve a niche for himself in this highly competitive industry.

1.    I understand that the path you took to enter Private Equity (PE) was different from most. Could you share with us how you leveraged your engineering background to break into the funds industry?

My approach to private equity is to find investment deals that have potential for (1) superior financial returns due to industry and business fundamentals; and (2) credible linkages to existing portfolio assets, allowing for differentiated value add to the investee’s operations.

However, in my early career, I did not harbor any intention of pursuing a role in private equity at all. Nevertheless, my committed focus to the healthcare industry, coupled with my investment and operating background, education, and regional experience have led me to a rewarding career within private equity. This is particularly so for an investment strategy driven by operating value-add.

Starting with education, I majored in Chemical Engineering at Massachusetts Institute of Technology (MIT) and recruited for healthcare bioengineering roles. I wanted to be a part of technology driven industry, and during the weakened economy at the time, healthcare industry hiring remained strong. I accepted an offer from Becton Dickinson, a Fortune 500 medical device company, to join their 3-year leadership development rotation program, which provided me new roles annually in engineering, product development, and manufacturing operations in different geographic locations.

Although the technical training is not so relevant in my current responsibilities, my non-traditional start to my PE career allowed me to develop a different skillset compared to training provided by the elite competitive banking and finance analyst roles taken up by most PE professionals.

The engineering experience ingrained in me the ability to apply a structured and analytical approach to any problem.

The annual rotations forced me to relocate every year, and strengthened my ability to adapt and build relationships quickly with new colleagues from varied backgrounds: age, education, status, culture, ethnicity, and economic status. Beyond the corporate finance, these are important considerations when evaluating and supporting management team partners as an investor.

Of course, I was also acutely aware that I was missing the finance and business skillsets to drive the decision-making process myself.

Specifically, I wanted to understand why certain projects get prioritized, and how to develop budgets and business plans to bring products and tech to commercialization.

As such, I decided an MBA was the necessary next step to develop my corporate finance skillsets. My goal was to enter investment and business development within the healthcare sector, so it was ideal that I enrolled into Wharton’s full-time MBA, reputable in both finance and healthcare management programs.

Upon graduating, I knew I wanted to work for Medtronic. As the world’s largest medical device company and market leader in advanced technology, I would consider it as the Apple of healthcare. After considerable effort, I landed my dream job in Medtronic’s Corporate Development team, which focused on both M&A and early-stage investing.

My timing was fortuitous, as by 2008, during the US financial crises, entrepreneurs increasingly turned to corporates as a source of funding, and Medtronic had a healthy appetite and balance sheet to invest. As a result, I gained a wealth of investment experience by leading and closing many high-quality deals in a short period of time.

It was then I realized how much I enjoy being an investor, and wanted to join an organization where the investment team is the primary profit center and decision-making group.

That’s how private equity (PE) came into the picture. However, I recognized my background wasn’t the typical mid-level hires that major PE groups sought after.

I broke into the PE industry by creating my own opportunity:

  1. Developing a strategy within Medtronic to work with GPs to invest in assets that would develop the local emerging healthcare markets; and
  2. Identifying teams of like-minded healthcare investors

With a positive track record at Medtronic and support from my senior leaders, my efforts led to the establishment of Singapore based regional healthcare fund Quadria Capital, with Medtronic committing to the new group as one of the earliest LP investors, and myself joining Quadria to lead investments in SE Asia.

Fast forward to today, I’ve moved on from Quadria to lead investments for Fosun Healthcare Holdings in Asia Pacific to get closer aligned to the market and further develop my investment experience.

2.    Could you tell us more about the technical skills or knowledge that people looking to enter this industry will need?

I think there are two key skillsets for those hoping to break into the industry and looking into a junior to mid-level role as an investment professional:

  1. Technical knowledge in finance and deal-making. Operating experience is very helpful in a sector-focused fund, but for investment team roles, it’s only possible if you can properly communicate the upside and risks of a deal accurately with commonly-used financial evaluation tools, and can logically structure agreements in accordance to market practice.  I personally don’t think you need to go through an investment bank analyst programme to get this training, but the skillset needs to be in place.
  2. Sector knowledge. It is important to understand the industry you want to focus on, such as trends and regulatory environment. This is especially critical for complex industries (such as healthcare, aerospace, energy), where you may be expected to continually advise management for origination or investment management purposes. Having that industry experience – even if it’s just for one or two years – is invaluable especially in a business development role where you deal with corporate finance and marketing strategy.

3.    What kind of qualifications do you think firms in the industry are looking out for and will give applicants an edge?

For junior-mid level entrants, the main requirement is experience working on investment deals in any role, ideally coupled with a background in corporate finance. You might have touched deals as part of a due diligence team, worked in a portfolio company, or have a family background in investments. You could have picked up finance skills from a CFA or MBA, or trained at a Big 4. How you get your experience is really up to you – these are all appropriate!

The edge is how you can demonstrate the application of experience successfully on deal-related work, even if it was to recommend against making an investment.

This will definitely be tested at any interview.

4.    What kind of soft skills or personality traits would you look for in a potential hire?

I see PE as a role that is entrepreneurial in nature. There are three things which I feel are particularly important:

  1. Self-starter and Vision. Competition in the industry is fierce and deals are complex to execute. Successful investors have clear strategies, and execute the big and small tasks pragmatically with whatever resources they have available. There will always be naysayers, but those who live for a challenge will thrive in such an environment!
  2. A creative and analytical mindset. There are many moving parts to a deal: the firm’s investment mandate, source of capital, the needs of the sellers and management team, other stakeholders in the process (such as co-investors), etc. An investment professional has to bridge these dots with legal documents, business plans, and numbers to make sure the deal will meet both near and long-term goals
  3. Thought leadership. When I consider potential hires, I don’t just consider the ability to use excel and PowerPoint.

I hope to work with up and coming leaders who have the confidence and ability to sit across from a CEO to discuss the business, ask thoughtful questions, and negotiate investment plans.

The CEOs of target companies live and breathe their markets, and I have found that they often prefer doing deals with people whom they can respect as a thought leader and partner in their sector, rather that somebody who just processes a cheque.

5.    Is a career in Private Equity as glamourous as made out to be? What’s the deal with carried interest?

The prospect of monetizing carry can definitely be attractive, but carry usually is rewarded years after any investment gets closed, and – depending on the firm – might be weighted heavily to the senior-most professionals in a firm. For someone just entering into the industry, it is possible that this aspect of compensation might not be so relevant, especially considering that mid-junior people do tend to move around, and might lose some or all entitlements to unvested carry depending on your agreements. (NB: Read the fine print)

Ultimately, I don’t think people should be entering into private equity industry only for the money.

Private equity can offer significant upside compensation for successful long-term outcomes along with comfortable basic compensation. However, for the junior-mid level aspirants, there are other fields of business and finance that could lead to similar basic compensation, but more immediate upside rewards (trading or banking for example).

Personally, I see PE (particularly at an operationally-focused investment firm) as being very comparable to being an entrepreneur in terms of setting a vision, raising capital, and executing a business plan.

The only difference is you place your bets with multiple companies. You hedge your upside, but also secure your downside. I recommend pursuing a career in PE if you’re interested in people interactions and the responsibility that comes with managing your investments.

In PE, you will receive broad exposure to business operations and high-level decision making at an earlier stage than most other careers. You might play several key roles in the business and work closely with the management team on issues ranging from acquisitions to human resources.

You could be in position to create opportunity for hundreds if not thousands of employees through new investments or better management of existing ones. I find that this potential for making impact is what makes my current role so meaningful and enjoyable.

6.    Any changes or industry disruptions you think new entrants should be mindful of?

Compared to 5+ years ago, I believe investors will become more operationally-focused, and therefore, more sector-focused, with more active participation with their portfolio companies.

This is partly driven by the demand side: families who own the most desirable targets will expect value-add contributions beyond capital from any new investment partner.

As for the supply side, with significant amount of PE funding recently raised in the Asia region across many firms, investment teams will need to demonstrate true differentiation if they seek to source proprietary deals or have an edge in a bidding process beyond their cost of capital.

7.    Any final advice to our readers?

For anyone who is looking to enter this industry, be bold about reaching out to investment leaders to learn more.

I’d advise if you’re requesting somebody’s time to learn more about their industry or company, be prepared to offer them insights about your own. You might leave a positive impression, and could create a new opportunity out of the conversation.

If you don’t know where to start, seeking out recruitment agencies with strong ties in this space (such as Funds Partnership Asia) is always a good way to obtain a general overview and layout of the industry.

If you are interested to make a mid-career switch or pursue a career in funds management, do send your queries to ayyaz@fundspartnership.com and we will be in touch shortly!