TPG buys stake in Asia secondaries specialist NewQuest

This represents TPG’s first foray into secondaries globally, but it is a largely passive investment from the private equity firm’s balance sheet. NewQuest will continue to operate independently and TPG has no plans to build its own dedicated secondaries capability in Asia. Co-investing alongside NewQuest on deals is also seen as unlikely at present.

"While we already have an established secondary directs business, and have been building our fund solutions business over the past 12-18 months, there are other spaces within the secondaries market that remain untapped," Darren Massara (pictured), a managing partner at NewQuest, told AVCJ. "If you look at how the US and Europe have evolved, areas of sub-specialization within the secondaries vertical have emerged. If those areas become interesting in Asia, we want to continue to capitalize on our first-mover advantage and believe TPG can be helpful in this respect.”

NewQuest was created in 2011 through a spin-out of Bank of America Merrill Lynch’s (BAML) Asia PE team. The firm primarily pursues single assets and multi-asset portfolios held by family offices, corporations, banks and hedge funds, as well as private equity firms. Sellers may be changing strategy, leaving a certain market or returning capital to LPs to support a new fundraising process. They may also be under end-of-fund-life pressure and willing to offload un-exited assets to liquidate a fund.

The NewQuest team raised a $400 million debut fund, most of which was used to acquire 21 private equity positions from BAML. A second fund of $316 million was raised in 2014 and then the firm closed Fund III in 2016 at the hard cap of $540 million.

The firm added fund solutions to its direct secondaries strategy with the launch of Fund III. This involves buying LP stakes in funds, but the firm seeks to differentiate itself from traditional secondaries players by targeting complex transactions. These would typically involve fund restructurings and spin-outs where NewQuest acquires a significant LP interest in a fund and collaborates with the incumbent GP.

Future opportunities may include entry into the renminbi funds, real assets, and venture capital spaces, but NewQuest has yet to put in place solid strategies. The partnership with TPG is intended to give the firm access to resources and expertise to expand its business when the time is right. TPG will also help NewQuest enhance its capabilities in areas such as deal-sourcing, execution and portfolio management.

TPG started looking at secondaries three or four years ago as part of an ongoing initiative that has seen real estate, credit, hedge fund, and impact investment strategies added to its platform. Finding that the US and European markets were efficient and highly competitive – to the point that returns are being bid down because of the amount of capital chasing deals – the firm turned its attention to Asia. The investment in NewQuest arose out of discussions intended to find out more about its business.

“As the alternatives landscape continues to evolve, the secondary market has emerged as an important tool for asset managers and investors to actively manage their portfolios,” said Jon Winkelried, co-CEO of TPG, in a statement. “In partnering with NewQuest, we see an opportunity to back a highly experienced team with a differentiated strategy and leading position in Asia’s rapidly growing secondary market."

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• Topics
• Secondaries
• GPs
• Secondaries
• Asia
• NewQuest Capital Partners
• TPG Capital
• Secondaries