TPG looks up after bumpy fundraise
The fundraising process for TPG Asia VI was not smooth. More than two-and-a-half years in the market, a reduced target, changes in senior management, and churn within the China team prompting questions about the PE firm’s ability to cover what is arguably its most significant geography. The finishing line was officially crossed last week, with $3.3 billion in capital commitments, less than the $4.25 billion raised for Fund V in 2008.
According to Tim Dattels, TPG Capital's Asia managing partner, the tide began to turn before the end of 2013.
Fundraising accelerated after November, which could be linked to a leadership transition that saw Dattels, who had previously been traveling between the US and Asia, relocate to Hong Kong as former regional co-head Stephen Peel stepped back.
The China issue was tied to the departure of Weijian Shan and Mary Ma in 2009 and 2010. Dattels accepts this was an issue in fundraising but argues that TPG's recent activity in China, plus the hiring of Steve Sun from Goldman Sachs and Jing Huang from Bain Capital, is evidence that it has been laid to rest.
Three of the first five deals out of Fund VI are in China - Phoenix TV, Xinyuan Real Estate and Chindex International, although the latter has yet to close - while UT Capital was sold for 2x book value and Grand China Auto is preparing for a Hong Kong IPO.
Around $1 billion has been deployed in these initial transactions, with co-investments accounting for about one third of the total. It is estimated co-investment by a handful of large LPs on top of the main fund corpus will take the available capital to $4.5 billion. Asian, Canadian and Nordic institutions are the major contributors to the fund.
Consumer franchises, financial services and healthcare remain the primary sectors of focus, although food and agriculture may feature more prominently as well, as exemplified by the acquisition of Australian poultry producer Ingham's Enterprises. "Many press reports say too much money is chasing too few deals, but we've encountered no slowdown and had no problem finding good deals," Dattels adds.
More than 30% of the fund will likely be deployed in China, 20-30% in Australia, and the rest in Southeast Asia, India, Korea and Japan. Ben Gray, Dattels' fellow managing partner, leads investment activity in Australia while Ganen Sarvananthan has been brought in from Malaysia's Khazanah Nasional to bulk up Southeast Asia coverage. TPG also has a tie-up with Northstar Group, a long-standing source of deals in Indonesia.
The firm recently made its debut investment in the Philippines, backing affordable housing developer 8990 Holdings, and is poised to make a breakthrough in Sri Lanka with the acquisition of a controlling stake in Union Bank of Colombo.
"Since the fourth fund we had also shown we had five deals in five different markets that have returned around 5x," Dattels says. "They were done by people at the firm today."
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