French alternative investment manager Tikehau Capital, which is actively expanding its reach within Asia, is currently raising capital from external investors for its maiden Asia-focused fund, Tikehau Asia Opportunities.
The firm declined to divulge the target size and timeline for the fundraising.
Tikehau Investment Management co-CIO and co-head of Asia, Jean-Baptiste Feat, told DealStreetAsia that Tikehau Capital is the main investor in the fund with a commitment of $125 million. Out of this, $110 million has been invested in 12 funds and deals across China, Japan, Australia, India and Southeast Asia.
Some of Tikehau’s investments in the Asia Pacific region include Australian unicorn lender Judo Bank and Singapore-based software company Deskera. It had previously invested in Singapore-based co-working space JustCo, before exiting to a group of investors for a net profit of S$27.7 million last year.
The firm is currently looking at participating in a number of deals and funds, including a “high-profile” deal in Singapore and a quasi-infrastructure deal in China.
With the track record at hand, Feat said, the firm is now embarking on conversations with various institutional investors to reach its target fund size. “With this head start, the investors will have good visibility on the fund’s strategies and targeted investments. We have got strong interest from the investors we have spoken to,” he added.
The Asia Opportunities fund was originally a feeder fund known as Fund of Funds I. It was recently renamed as the firm saw opportunities in a strategy to combine investing in funds and deal co-investments, said Feat. “Today, the fund is investing in existing funds and co-investments on a 50:50 basis. In the future we would like to increase the co-investments part of the strategy to 60%,” he added.
Tikehau Asia Opportunities invests in mid-cap growth or buyout funds established by local players. This is the same strategy adopted by Tikehau Capital for its investments throughout Europe, said Feat.
The firm prefers to invest in well-diversified funds with specific investment strategies, managed by teams that have expertise in the markets and sectors the fund would be investing in.
Meanwhile, for co-investments, Tikehau Capital invests with like-minded firms and typically does not lead deals.
Exploring the Asian secondaries market
Early this month, Tikehau Capital picked a majority equity stake in Asia-focused secondaries investor Foundation Private Equity (Foundation PE) to cement its expansion and investment capabilities in the region.
The strategic partnership also supports Foundation PE’s second close of its $250-million debut fund that targets investments in China, India, and Southeast Asia.
“The opportunity within Asia’s secondaries market is growing. The private equity investors in Asia have been very active the last few years, and hence there is a need to provide some liquidity solutions to these investors,” said Feat.
He added that Asian investors typically enjoy liquidity and regular cash returns. “The concept of being locked in a 10-year fund with a potential two-year extension can be hard for some investors to accept. Players like Foundation PE provide part of the solution, and we think it is a great opportunity for us to participate [in it],” said Feat.
Although the secondaries market in Asia cannot be compared to that of Europe and the US, Feat said, it is developing and could potentially catch up to the more mature markets.
“Compared to Europe and Asia, where there are huge players in the alternative financing space, Asia is definitely less developed and fragmented. However, the growth potential is huge, given the underlying fundamental trends such as growing population and rising middle class,” he observed.
One noteworthy trend in Asia is the growing importance of family offices, he said. Income generated from generations-long businesses is now being invested in a more institutionalised way, managed by qualified asset managers looking at more alternative investments as means of diversification to complement returns from traditional asset classes.
Tikehau Capital currently has three offices in Asia – Singapore, Seoul and Tokyo. The firm welcomed Singapore state investment firm Temasek as one of its investors in 2016.
In the same year, Tikehau Capital invested in IREIT Global, the first listed property company in Singapore to invest solely in strategic assets in Europe. In April last year, Tikehau Capital increased its stakes in IREIT Global from 16.64% to 29.2%.
With €29.4 billion of assets under management as of March 31, 2021, Tikehau Capital has developed expertise across private debt, real assets, private equity and capital markets strategies, on top of multi-asset and special opportunities strategies.
The firm invests its own capital alongside its investor clients within each of its strategies, leveraging its strong equity base worth 2.8 billion euros as of December 31, 2020.