12/16/2009

StepStone Leader Packing Bags for Beijing

Stepstone Group founder Monte Brem is moving to China, where he'll oversee ongoing efforts by the private equity consultant to expand its overseas presence.

Brem plans to establish a Beijing outpost for his La Jolla, Calif., outfit early in 2010 and aims to have three or four staffers there by the end of the year. In a precursor to the transfer, he'll be spending a lot more time in Asia beginning Jan. 1.

His initial work will focus on drumming up new business while managing existing advisory contracts for two clients outside Asia: AMP Capital and Kuwait Investment Authority.

StepStone is also one of several firms that won contracts in 2007 to advise China Investment on specific private equity projects. But the firm hasn't done any work for the giant sovereign wealth fund since 15 months ago - when it became clear that a friendship between Brem and China Investment's private equity director, Li Yingru, had grown more personal. The pair is now planning to get married, which is certainly among the motivations for Brem's move. It also exacerbates potential conflicts of interest that might be resolved only if StepStone walks away from the China Investment contract or if Yingru leaves her post.

While impressive on paper, the China Investment mandate has not been particularly lucrative for StepStone. A template for the firm's future business might instead be seen in its work for AMP, Australia's largest mutual fund manager. The Sydney company hired StepStone in January to manage a new program aimed at taking advantage of discounts on private equity investments.

StepStone's ambitions in Asia have gradually taken shape since early this year. They represent the first step in a plan by the firm to eventually maintain a more active business worldwide. Brem is now mapping a European presence, for example. The firm's current client roster consists mainly of U.S. pension systems, including Los Angeles Fire & Police, New York State Teachers, San Diego City Employees and State of Wisconsin Investment. It also advises George Kaiser Family Foundation and Rady Children's Hospital.

StepStone was founded in early 2007 by Brem and a handful of colleagues from his former employer, Pacific Corporate Group. It was at Pacific Corporate that Brem first met Yingru, who at the time was working as a junior staffer at client Calpers.