KKR & TPG near first close for their Asia-focused funds

Global private equity giants KKR and TPG are set to hit the first close of their new Asia focused funds this summer, multiple people familiar with the plans told DEALSTREETASIA.

In the case of KKR, the first close for its third pan-Asian fund could be as early as April 2017, an industry executive confirmed. Another industry executive said TPG’s first-close for its seventh Asia fund was scheduled for summer 2017, indicating that it could be over the next three to four months.

KKR is targeting to raise $7 billion for its third pan-Asian fund that has an institutional hard cap of $8.5 billion, while TPG is raising $4.5 billion for its seventh Asia Fund. Both firms had issued private placement memorandums for their respective new vehicles towards 2016-end, according to an industry executive with knowledge of the matter.

KKR is set to hit a first close of around $4 billion, and for TPG, the respective figure will be a little over $2 billion, this portal has learnt.

Both KKR and TPG declined to comment on their latest Asia funds. A spokesperson from KKR said: “We do not comment on market speculation involving deals or fund raises.”

For KKR and TPG, their new-Asia focused funds will be larger than their previous ones – TPG Asia VI had raised $3.3 billion in 2014, while KKR’s Asia Fund II had set a regional record when it had raised $6 billion in 2013.

Currently, TPG Capital Asia manages about $6 billion in assets.

Other global majors are also raising Asia specific funds. These include Carlyle that is looking to raise a $1 billion Asian growth fund focused on investing in India and China, and Savills Investment Management, which is set to launch a billion dollar fund focused on this continent. Blackstone, too, is readying an over $5 billion Asia real estate focused fund.

Gaw Capital Partners is also set to announce the final close to its latest vehicle – Gaw Capital Real Estate Fund V, a pan-Asian fund opportunity – at around $1.3 billion, marginally lower than its target of $1.5 billion. This vehicle had hit its second close of $890 million in August 2016. Gaw Capital, jointly with TH Real Estate, is also raising a separate $2 billion fund that is targeted at Chinese malls.

Earlier this year, Hong-Kong based private equity firm PAG Asia Capital run by former TPG executive Shan Weijian announced that it raised $3.66 billion for its second Asian buyout fund. In October 2015, Hong Kong and Singapore-based RRJ Capital closed the largest-ever private equity fund for an Asian firm at $4.5 billion. The same year, Hong Kong-based Baring Private Equity Asia raised $4 billion for its sixth Asia fund. In December 2016,Warburg Pincus LLC announced that it had raised a new $2 billion fund that will focus on growth investments in China.

KKR and TPG have also made a slew of new hires even as they ready their latest vehicles. For TPG, the new top management hires include partners Joel Thickins as Country Head of Australia and Sanghoon Lee, who will lead TPG Capital Asia’s investment activities in South Korea. In late 2016, KKR also named Ming Lu as the sole head of its Asia private equity business, and it also brought on board Ashish Shastry from PE firm Northstar Group, to head its operations in Southeast Asia.

These Asia-focused investments come as a natural hedge for long-term investors looking to boost their returns at a time when the developed markets may not offer returns that warrant such investments.

KKR’s earlier Asia fund, the $6 billion Asian Fund II is learnt to have deployed about 70 per cent of the fund last year, a benchmark commitment when achieved , such private equity firms start working on the follow-up funds. According to data from the California Public Employees’ Retirement System (CalPERS), which had invested in KKR & Co’s Asia Fund II, the latter had an internal rate of return (IRR) of 26.4 percent through December 2015.

On a visit to India last week, TPG co-founder and co-CEO Jim Coulter had told at a Bloomberg private equity forum that the alternative investment firm is bullish on private equity in India.

“The world needs high returns. We’re at a period of time when we really need it…We have to be aware of risk but search for growth, something I think bodes well for the Indian market,” Coulter said according to a Bloomberg report.

Also Read:

Morgan Stanley, Savills, Blackstone ready Asia-focussed realty funds. Total corpus at $6.5b

Alternative investment firm TPG sees opportunities in Asian healthcare, finance

KKR moots deploying PE capital to clean up $180b bad debt in India