Big is Better: Are mega funds making a comeback?

Take, for example, Baring Private Equity Asia and the $2.46 billion it raised for its most recent fund. Marketing begun last year with a target of (only) $1.75 billion, yet interest was so strong that fund size had to be increased to accommodate additional investors. Even with the revised final closing amount, some reports suggested that another billion was turned away. Established Asian funds, as Jean Eric Salata said in our interview on page 14, are highly sought after, and with LPs very keen on Asia, teams that have successful records will be able to raise money.

The institutional support has been felt here since last year, when we saw substantial funds being closed by Navis, CDH and SAIF, although none breaking the $2 billion mark. To provide a good statistical guess, our research team has taken the average size of the 10 largest USD-denominated PE funds raised each year. As you can see in Chart A, the average size of a Top10 Asian fund was around $1 billion in 2005 and peaked at $2.3 billion in 2007/2008. As expected, 2009 was a slow year but fundraising seems to have improved to around $1.36 billion per Top10 fund. Fundraising is definitely back on the rise.

However, in terms of actual final fund size, it is anybody's guess, but with a recovering market and the funds (mostly buyout focused with previous funds rivaling Baring Asia V in size) that will be out in the market, we (with the risk of oversimplifying) estimate that the average Top10 Asia fund may well jump to close to the $3 billion mark. Watch this space.

 

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• Topics
• Fundraising
• Baring Private Equity Asia
• Navis Management
• SAIF Partners