Private Equity Fundraising Remains Strong in Asia


September 23, 2015


All the eyes are currently fixated in China, as Asia’s largest economy continues to show worrying signs. Private equity investors around the region and the rest of the world are also paying close attention to the problems, as well as the opportunities China’s current economic slowdown could present. While the country’s economy is troubling many investors, fundraising activity in Asia continues to stay strong.


The Latest Fundraising News


On Tuesday, ADV Partners announced it is holding a final close on its pan-Asian Fund. The private equity firm successfully raised around $545 million with the debut fund, joining a group of other firms, which have managed to continue fundraising amidst the problems in China.


Previously CDIB Capital International Corporation closed its $405 million fund. The firm’s strategy is to find growth investments in the Asia Pacific Region and it’s planning to pay extra attention on Chinese consumption. In fact, the $405 million fund is the fourth fund the firm has started in 2015.


In addition, Golden Gate Ventures raised $50 million with its start-up fund. The firm is betting on the technology and services sector, aiming to invest in start-ups in Southeast Asia.


Ascendent Capital Partners also managed to close its China-specific fund a few months ago. The firm’s second China-focused fund managed to beat its expectations, raising $600 million, which is $100 million above its target.


Furthermore, the latest ADV Opportunities Fund I LP has already deployed around 30% of the $545 million. Its investments have ranged from a Chinese low cost furniture exporter to a licensed coal-bed methane developer in China. The firm is looking for midmarket deals, especially in China and India, but the firm said it wouldn’t shy away from investment opportunities elsewhere in the region.


Eaton Partners, the global fund placement agent that worked with ADV Partners in the inaugural pan-Asia fund, remains positive about the opportunities in the region. Chris Lerner, partner and head of Asia at Eaton Partners, said in the official statement, ”Following a detailed exercise in landscaping regional managers, we concluded that ADV’s unique yet proven strategy is well suited to capitalize on inefficiencies present in Asian markets”.


Interest from Pension Funds


The fundraising efforts are supported by continued interest from pension funds. Canada’s biggest pension fund recently announced how it would like to quadruple the amount the fund invests in the region. The executive of the Canada Pension Plan Investment Board (CPPIB), Mark Wiseman, told the Wall Street Journal, how the slump in the Chinese stock market is presenting investors with more attractive long-term opportunities.


Mr Wiseman also told in an interview with the Australian Financial Review, the “economic hiccup” in the region creates more opportunities for pension funds such as the CPPIB. “It’s times like these when we often find high quality assets, high quality companies that we might otherwise have a hard time investing in suddenly become available,” he said.


The regions private equity funds were also excited to learn that the world’s largest pension fund is set to start investing in private equity. Japan’s $1.2 trillion public pension fund is looking for investment deals in developing countries; so Asian companies are likely to attract some interest as well.


Teaming Up With Local Players


Private equity firms are looking to find local partners as part of their investment strategy. Golden Gate’s $50 million fund secured investment from Naver, the multi-billion technology firm. At the time, Vinnie Laurie, the founding partner at Golden Gate, told TechCrunch one of the reasons for securing Naver as an LP for the fund was because it is “a large pan-Asia corporation” and therefore, it “gets insights into earlier stage companies which could yield later stage growth investments”.


The big private equity firms have also started to look into deepening their ties with regional investors and companies. CVC Capital Partners recently hired Pete Vo, the former head at Ho Chi Minh City-based private equity firm Vietnam Investment Group, in order to scout for better deals in the region, and more specifically Vietnam.


Positive View of Risks


A Coller Capital survey showed that limited partners, especially those in India, Japan and Korea, remain positive about private equity and this positive view of the risk and reward associated with the industry has improved in recent years. While investor attitudes towards the risk and reward equation in terms of China have deteriorated, many other countries in the region have managed to improve the outlook.


While the above examples show fundraising has continued strongly in the region, the overall levels have slowed down a little. Preqin’s data shows the first half of 2015 saw Asia-focused funds raise less than one-third of the equity raised during 2014. So far, funds have raised $20 billion, while the fundraising in 2014 stood at $72 billion.


But it could be that the second part of the year continues to beat expectations. Bain Capital, for example, is currently looking to raise $2.5 billion with its third Asia-focused fund. The private equity firm closed its previous fund in 2012, having raised £2.3 billion.


Bain Capital is not the only fund currently raising money. Formation 8, the San Fransisco-based fund, is seeking around $400 million with its new growth fund in the region. Even though China continues to cast shadows on the global investing scene, confidence over Asia’s private equity industry remains upbeat.


Putting the Money to Work


The issue for Asian funds now is to deploy the capital. China-focused private equity firms are sitting on around $327 billion in dry powder, according to Preqin. This poses challenges to many firms, especially as the country continues to cope with the turbulent stock market.


Furthermore, the region has experienced big deals this year as well. One of the biggest private equity deals took place recently, as Tesco sold its South Korean unit, Homeplus, to private equity firm MBK Partners. The deal was worth over $6 billion. But there is some concern among investors over the current asset prices. As firms have an increasing amount of capital at their disposal, the asset prices could be driven up to unattainable levels.


For more deals in the region, check out the DealMarket platform.

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