Raising such a large sum of money is a great effort on the part of CVC, owing to the huge sums of money that are currently sat in funds going unspent, and specifically given the percentage of these funds that have been raised for investment in the Asian region.
No secret has been made in recent weeks and months about the uncertainty that surrounds the Asian emerging markets, and while there are headline deals and brilliant opportunities still popping up around the region, private equity firms are, in general, proceeding with caution across Asia as a whole.
The $3.5billion sum is the result of nearly a year’s worth of fundraising activity from CVC, who opened their fundraiser in June 2013. Demand for the fund far exceeded the sums raised, with a source telling PENews that investors from across the world were interested in committing total sums up to $5billion to CVC.
It is understood that the biggest contributors to the fund have been sovereign-wealth and pension funds. Although the fund is impressive, it is below CVC’s previous Asian fund, which raised $4.1billion when it closed in 2008.
Nevertheless, raising such a sum proves CVC’s reputation has remained intact throughout the global financial crisis, and clearly there is still a lot of investor confidence that CVC can source great deals in Asia and deliver high returns to investors.
At the same time, to raise $3.5billion in a little under a year is impressive going in comparison to the rest of the marketplace. PENews also noted that TPG Capital and Carlyle Group are among CVC’s rivals that have been unable to match this rate of fundraising.
TPG’s latest Asia fund is likely to close in the next week, with a sum in the region of $3.3billion expected to be the total raised, while a January report in The Wall Street Journal listed Carlyle as having raised $1.58billion for a fund with a $3.5billion target that it started to raise in mid-2012. Carlyle have not responded to requests for comments from a variety of reporting outlets.
The total dry powder for the Asian region sat at $138billion at the end of 2013, based on Bain & Co. data, while approximately $10billion has been secured in closed funds so far this year.
While the common problems that private equity firms have faced in Asia remain, namely a lack of appetite for IPO’s and red tape surrounding investments and buyouts, CVC are looking to diversify their investments and are taking this approach to ensure they don’t end up sitting on their fund as dry powder for the rest of the decade.
According to PENews, Roy Kuan, Managing Partner of CVC, told The Wall Street Journal, “We don’t want too much of the fund in one country or sector. Our idea diversification is one-third in southeast Asia, another third in China, with Japan and Korea taking the remaining portion.”
Kuan also stated that CVC are keeping a close eye on the Chinese buyout sector, as despite the currently low number of deals it is currently in a process of reform and evolution that could see it become much more attractive and active in the near future.