PE Scene in Asia

Was wondering if anyone could shed some light on the PE space in Asia? Understand most MFs have presence, alongside funds that operate only out of Asia (e.g. Baring, MBK, CDH, CITIC Capital), but which ones have the best dealflow/are the most active?

Thanks in advance!

 

MF's like you mentioned are huge, along with Partners, Navis (though this is mostly SEA-focused), Baring PEA, and Oaktree being most visibly active. Within China there are a decent amount of SOE backed funds as well which do scattered deals throughout the Chinese mainland. I'd also mention I've seen a decent amount of activity coming out of Morgan Stanley Private Equity Asia. Also look into AGIC, which is a Chinese/German fund I've seen with some increased activity as of recent.

Hope this helps - I'm not Asian for what it's worth but it's certainly an area of interest for me.

 

Thanks, this is helpful. Any idea as to which of the MFs are more active? Understand they all have pretty sizable funds, but for some of them (e.g. BX) it might be harder to get investments through IC (possibly because they have to go through IC based outside of Asia).

 
Best Response

If you're talking about China/HK, you have to consider a few things:

1) How local is the team? Given you are based in the US, this will impact working environment, culture, and team composition. 2) What types of deals do they (the China team) do? Leveraged buyouts, which is quite vanilla and common in the US/EU, or mainly growth/VC style deals? Asia PE funds have traditionally focused on Growth equity-type deals. For the Asia-based funds, how much cross-border are they doing? This will determine what you learn and the working style of the team.
3) Recent fundraising efforts and whether they are investing out of a global fund or a pan-Asia fund. This determines how much pressure they have to get deals done and as well as how well they have invested in the market.

Below are my observations and what I've heard from colleagues/friends -- they are "outside in" observations. Overall for the Chinese funds, I don't know much about them as I'm not based in that market.

MF:

KKR - Doing well in Asia, but the spotlight is not on China but on Japan. That's where most of there returns/capital allocation have and will be driven by. They ideally want to move towards more buyouts in China, but as evidenced by the recent China deals they done, they are still doing Growth/VC style deals. This may or may not be attractive to you. The team is all extremely local, and based in Beijing for the PE side. The former China head left to start his own fund too.

TPG - Doing not so well in Asia. Struggling to fundraise, or at least not as fast in attracting LP money due to its lackluster performance in Asia recently. Tends to like to look at buyouts, and hasn't done as much Growth/VC style deals as its MF peers. That may change with the hiring of Chang Sun, who led Warburg to insane success with some of Warburg's VC/Growth deals in the last decade.

Warburg Pincus - Doing well in Asia and a top place to be. Caveat that they are really local and have heard hard hours. They look at Growth/VC style deals, and because of this the teams are looking for local talent that can source/DD/execute in a more local type of environment. The idea here is that Warburg China is run like its own ship, and the powers back in NY are keen to let it continue this way as it has driven good returns.

Carlyle - Doing well in Asia and are on track to raising $6.5bn in its most recent Asia fund. Have traditionally done growth/vc/small-cap buyout deals in China, but I presume is eager to do more in the buyouts space given the large latest fund size. Though I would think that they are also leaning towards Japan/Korea for more of the large equity check buyout deals. Team is largely local, but not as much as a shop like Warburg Pincus.

Blackstone - They are doing alright in Asia. Few past investments in China have been largely flops from what I heard, but that wasn't even the problem. They have difficulty in getting IC approval (NY-based global IC), and are also strictly focused on buyout opportunities. That makes it hard to get deals done in this type of market. Heard they are doing better and managed to get a few deals done this past year. They are also raising a pan-Asia fund (they are currently investing out of Global Fund), that may help speed dealmaking up and ramp up pressure to allocate capital.

Other MFs - Prob not worth mentioning. At least in Asia.

Pan-Asia Funds:

Only the top few are, in my opinion, worth considering:

PAG - Led by a former TPG China star deal maker. One of the more active names in the industry (Yingde privatization). Overall seems like a great shop to be at due to sufficiently large fund sizes and interesting investment strategy. They've done large buyouts (Yingde/Lexmark) along with other types of transactions (including some Growth transactions). Would say that it is more China-heavy than the other Pan-Asia funds.

Baring - They seem to have done well historically in Asia and are one of the most active names in the deal market. They have been active in growth historically, but are right now focusing on buyouts from what I can see. Rumors are that they are fundraising, not sure about their fund size this time though. Last fund size a few years back was $4bn. They are increasing allocating capital to cross-border opportunities with Asia growth opportunities. (Notable one is a deal that they partnered with Onex).

MBK - Been increasingly active across the North Asia markets, but still largely Korea-focused (given Korean founder). Founder was ex-Asia head of Carlyle, and struck out on his own quite well. Experienced some turnover with the China team due to the previous China Head leaving to set up his own fund. Though not as strong as PAG/Baring from what I have heard.

Affinity (Maybe) - Strong track record across Asia (ex-China), and recently raised an impressive $6bn. Largely focused on SEA/Japan/Korea. The whole leadership team is all SEA/Korean.

Chinese Funds

CDH/Hillhouse/Boyu/Hopu - I would group these into one group, as they are pretty similar. They still largely do VC/Growth type of deals and haven't done a lot of buyouts (but are increasingly looking to given recent Logicor/Belle deals). Teams are all definitely really local too.

CITIC Capital - Interesting shop (they did McDonalds with Carlyle). No other opinion/insight other than that.

 

I'll take a stab at this, assuming that you are asking this in the context of Asia PE. There really is a lack of tangible and somewhat accurate information on the Asia PE space in WSO.

The SWFs that are active in Asia PE at this point are namely: CPPIB (Canada), OTPP (Canada), GIC (Singapore), Temasek (Singapore), CIC (China), Khazanah (Malaysia).

CPPIB and OTPP all have presence in Hong Kong, but because of the structure and setup of their team, they lack the on the ground execution capability that you see with GIC/Temasek/CIC for China deals, and rely heavily on the relationships with GPs that they invest in to source co-investment opportunities. And even then, they really don't get in anything that is quite as local on the ground as GIC/Temasek. A lot of their work is piggybacking off of the GP's work, hence almost having most of the DD and work done for you.

GIC and Temasek are from what I've seen have the most on the ground presence in China, with offices in Shanghai and Beijing. Many former Asia dealmakers have come out of Temasek (RRJ Capital being a successful example), and they seem to have more capabilities in execution than the Canadian guys. Most of their investments are mostly around minority growth transactions, which is quite different from the trend the overall market is going these days with buyouts.

CIC is altogether a different beast, as it is still very much a state-operated entity. They too are big LPs to many GP relationships and are tight with various GPs such as Blackstone and KKR. You see them behind the scenes for many deals and mainly rely on co-investments for their PE strategy, but do show up here or there sometimes (most recent deal being the unsuccessful take-private of Yum China). Their teams are extremely local, and they virtually do not consider candidates from traditional banking talent pools, nor would they be attractive destinations either.

My overall view on SWFs are that there are some good and decent platforms to join (CPPIB, GIC, Temasek mainly), but they always play second fiddle to the traditional PE opportunities due to the lack of hands on execution, portfolio involvement, and reliance on co-investing nature of these roles. It is rare if not extremely difficult for anyone to go from SWFs to traditional PE shops (KKR, BX, Carlyle, PAG, etc.), due to their experience being looked down upon by those shops. Optionality going the other way though is quite viable. But that is by no means saying that a direct/co-investing role at a SWF is not a great place to be. I would assume that while pay will be lower comparatively to top tier PE, lifestyle should be better.

 

tothedeath, after your summer sophomore internship at Jefferies last summer, it's good to have confidence, but you shouldn't be cocky...

anyone who wants a top investing job (PE, distressed, etc) that requires a certain type of skill set would consider SSG a top spot to be at...they've made money both on the distressed and buyouts side....

where do you go? georgetown or stern?

 
Funniest

I wasn't at Jefferies this summer, genius - I was at your mom's house, giving her orgasms so lucid she had to get back surgery. Sorry about the stains on the dining table by the way.

SSG is a top spot for sure, it's just not a fund. You can argue all you want but it's not going to change the fact that ASSG invests off the balance sheet. They haven't done any buyouts either, and I'm more qualified than you to say this.

I don't go to a non-target like georgetown or stern. what about you? wellesley or barnard?

 

i would also like to know how the pe market is doing in asia especially in india. the growth in india has led many firms to open shops there but i have no idea about the deal flow. can someone elaborate on this issue? thank you.

 

Deals are happening in India and China. But alot of ppl have left to start their own PE Funds in both countries. Taking China for example, the Chinese partner of GS has left to start his own fund and a group of Temasek (Singapore's SWF) have left to start their own funds. Deal flow is much slower in SEA. ME PE is still in its infancy but expanding very fast as there are many opportunities there.

 

I know that a lot of the mega-funds are investing more and more into their Asian businesses. How does experience, deal-flow, etc. compare at shops such as TPG-Newbridge or Carlyle compare with in the States? Also, I assume that there'd be more opportunities three-four years down the line (considering the emerging status of the current industry life cycle)? I think working in Asia would be an amazing and unique opportunity, not to mention that it'd offer a different dimension for those bschool apps...

 

Could someone familiar with the situation speak up... I would like to know as well... although my guess is that because of the regulation and control of the chinese government, most PE investments in china are minority stake at the moment?

 

what warburg pincus and the like are doing in asia is little more than piggy-backing on the red-hot local equity market, which is fine only as long as the party keeps going...


PE really doesn't bring much to the table. take china: money? if anything there is too much money looking for placement, not the reverse. expertise? somewhat, but difficult to effect control when you are a minority. financial engineering / leverage? nope, as most are no-leverage growth equity stories. plus any big well-run company can go IPO and triple on first day, wtih CEO getting rock-star treatment, so why go private? this leave PE guys with slim pickings.

big funds starting local ops is more about fears of missing potential goldrush down the road / gimmick about having a story to sell investors why they need to raise a fund 3 times the last one...

i've seen this before, in japan, in germany, it will all end up in tears...

(ps. sure china is bigger than J/G and long-term will offer good opps, but believe me, when long-term comes, it will be chinese firms doing the local buyouts and the foreigners looking in. just a reflection of entrepreneurship flair/ adaptability of the locals coupled with autocratic / protectionist government...)

 

This DOESN'T necessarily mean that the Asian markets are intrinsically not conducive to PE; it's just that private equity as an asset class and the leveraged finance market is still in its infancy over in Asia. For obvious reasons, sponsors don't want to straddle less mature Asian companies with high lev multiples now, esp. after the overlevering disaster here in the US.

 

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