Baring Private Equity Asia (BPEA) is seeking to raise $8.5 billion for its eighth buyout fund, show board meeting documents from a limited partner (LP).
The fundraising target represents a $2 billion increase compared to its predecessor $6.5 billion fund, which held its final close in Jan 2020.
BPEA intends to make a GP commitment of at least 2.5% of the aggregate capital commitments to its latest vehicle, according to the documents from the Employees Retirement System of Rhode Island (ERSRI). The pension fund is planning to commit up to $50 million to the fund.
BPEA’s eighth fund will allocate up to 10% of its capital to growth-stage investments, alongside traditional buyouts.
The Asian PE firm typically targets control buyouts of companies with enterprise values between $500 million and $2 billion across China, India, Japan, Korea, Southeast Asia, Australia, and cross-border deals where Asia could play a significant role in future returns.
The firm’s eighth fund will write cheques between $150 million and $500 million and invest in 18 to 22 companies.
“The fund will aim to source companies with leading positions in niche markets that can maintain pricing power and margins,” ERSRI added.
According to the pension fund, BPEA’s seven first funds have generated a combined net return of 1.64 times invested capital, a net IRR of 14.9%, and a net DPI of 0.64 times invested capital as of March 31, 2021.
Its six most recent funds have generated a net IRR of 15.8% since 2002, outperforming the MSCI AC Asia Net (USD) Index by 6.8%.
Fund VII, which was 71% committed into 17 transactions by the end of June 2021, delivered a 1.8x net MOIC and 52% net IRR.
BPEA Fund VII Investment Returns
The $4 billion Fund VI delivered a 2.1x net MOIC and 20% net IRR by June, according to a BPEA presentation prepared for ERSRI.
BPEA charges a 20% carry interest with an 8% preferred return. The management fee is 1.75% on committed capital during the investment period of five years, followed by a 1.5% annual fee on net invested capital thereafter.
The Hong Kong-based manager’s Fund VIII recently received a commitment of up to $100 million from another US pension fund, the Illinois Municipal Retirement Fund.
Meanwhile, ERSRI had earlier committed $15 million to BPEA’s sixth fund and $50 million to the seventh vehicle.
ERSRI said BPEA VIII is not expected to make its first investment until next year and will be considered a 2022-vintage fund. Therefore, the pension’s commitment will come from its 2022 private equity programme.
BPEA will then represent approximately 6.3% of the total ERSRI private equity portfolio, the US pension fund added.
The ERSRI earmarked 12.5% of its investments for private equity, while the actual allocation was 10.9% as of July 31, 2021. Within private equity, its target weighting to Asian markets is 8%.