Warburg Pincus seeks $4.25b for China, SE Asia fund - update

The target for Warburg Pincus China-Southeast Asia II was identified in a US regulatory filing. New Jersey State Investment Council has indicated it wants to invest up to $100 million in the new fund.

According to a disclosure by the pension system, Warburg Pincus China Fund I - which invests alongside the firm's $13.4 billion 12th global flagship vehicle - had deployed $1.5 billion across 25 China and Southeast Asia deals as of year-end 2018. The vehicle had generated a gross IRR of 40% and a gross multiple of 1.33x. The net IRR and multiple were 22.5% and 1.22x. 

The successor fund will operate in a similar way. It will participate in China and Southeast Asia deals on a 50-50 basis with Warburg Pincus' global growth fund, for which a filing was made last November with a target of $13.75 billion. Healthcare, logistics, e-commerce, technology, consumer and retail, and environmental protection are expected to be the key investment themes. The firm retains the flexibility to operate across the entire spectrum, from early-stage to buyout. 

Energy and financial services deals will be shared with the firm's global companion funds for those sectors. For energy transactions, the China-Southeast Asia fund will take 50% with the rest split between the global growth and energy vehicles. For financial services, China-Southeast Asia and global growth will each get 40%, with 20% going to the sector fund. 

This approach has already featured in some deals in the region. For example, when Warburg Pincus participated in Ant Financial's $14 billion Series C round last year, there were contributions from the global, China, and financial services funds.

The move to include Southeast Asia alongside China in the fund name comes on the back of the GP ramping up deployment in the region in recent years. According to AVCJ Research, Warburg Pincus has participated in nine deals since the start of 2016 and seen two portfolio companies go public. The firm also opened a Singapore office in mid-2016.

Last year, it made a $370 million investment in Vietnam Technological & Commercial Joint Stock Bank (Techcombank), which went public a few months later. In 2017, the firm secured its first partial exit in Southeast Asia as Vietnam shopping mall operator Vincom Retail completed an IPO. Warburg Pincus backed the company in 2013 and re-upped two years later.

Other activity in Vietnam includes the establishment of hotel and infrastructure platforms and a commitment to financial technology player Momo. In Indonesia, the GP has backed ride-hailing and delivery platform Go-Jek, tax reporting business OnlinePajak, and shopping mall developer NWP Retail, while in Singapore it supported a take-private of ARA Asset Management and led a funding round for visual technology specialist Trax.

Warburg Pincus describes its approach in China as partnering with entrepreneurs and management teams to build companies of sustainable value. This has perhaps been most visibly illustrated in ESR, which filed for a Hong Kong IPO in March. The GP teamed up with two local entrepreneurs to form the business in 2011 and it now claims to be the largest Asia Pacific-focused real estate logistics platform, helped by a merger with Redwood in 2016.

Warburg Pincus reported a net IRR of 19%, a net total value to paid-in (TVPI) of 1.76x and distributions to paid-in (DPI) of 0.75x for the China investments in its 11th global fund at the end of last year. For Fund X, the IRR, TVPI and DPI were 15.5%, 2.16x, and 1.23x.

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• Topics
• Fundraising
• Growth
• Greater China
• Southeast Asia
• GPs
• Warburg Pincus Asia
• China