NewQuest reaches first close on Fund III, hires ex-CVC executive

The fund has a hard cap of $520 million, according to sources familiar with the situation who are not part of the GP. The first close comes as NewQuest separately announced the appointment of Daizong Wong, formerly a Beijing-based managing director at CVC Capital Partners, as a partner.

NewQuest was created four years ago through the spin-out of Bank of America Merrill Lynch's (BAML) Asia private equity team. They took 21 private equity positions with them and raised a $400 million fund backed by HarbourVest Partners, Paul Capital, LGT Capital Partners and Axiom Asia.

The second fund closed in June 2014 at $316 million, exceeding the $300 million target, with around 10 LPs, including an Asian sovereign wealth fund and an Asian pension fund. While virtually all of the Fund I corpus was used to acquire the BAML assets, Fund II was only partially seeded - with a portfolio bought from a China GP and China Hydroelectric.

In the latter deal, NewQuest privatized the company after accumulating a majority stake in the business by acquiring interests from other investors. Last September, Shenzhen Energy agreed to buy China Hydroelectric for $542.6 million, paving a full exit for NewQuest and co-investor Tsing Capital.

Fund three, which launched barely four months ago with a $500 million target, represents a departure for the GP because it is unseeded. However, the core strategy remains the same: NewQuest will pursue single assets and multi-asset portfolios held by family offices, corporations, banks, hedge funds and PE firms.

In most cases, GP sellers need liquidity, perhaps so they can return capital to LPs in support of a new fundraising process or because they are under end-of-fund-life pressure and want to liquidate a fund. This dynamic is particularly prevalent in markets, such as China and India, where private equity firms have struggled to exit minority positions via the IPO market.

"NewQuest's fundraising success is attributable to the fact that they have a differentiated strategy," said one source in the LP community. "Clearly there is an opportunity in China and India - their two core markets - to take advantage of pockets of distress or individual groups that need to sell."

The appointment of Wang, who will be tasked with opening NewQuest's China office later this year and deepening the firm's origination and operational capabilities, reflects the growing acceptance of direct secondary transactions as an exit option for Chinese investors.

"The Chinese private equity market has transformed substantially in recent years. Over the next 5-10 years, I see significant opportunity for a direct secondary focused strategy as the private equity market continues to mature," Wang said in a statement.

Before joining CVC, Wang was CIO of Chinese conglomerate Sinobo Group and CFO of Little Sheep Group, a Hong Kong-listed restaurant operator, which was subsequently sold to Yum! Brands. He also worked for 3i - an investor in Little Sheep ahead of its IPO - and Goldman Sachs.

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• Topics
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• Greater China
• NewQuest Capital Partners
• Asia
• Secondaries
• Appointments