MBK sets $6.5b hard cap for fifth North Asia fund

The other five are Hillhouse Capital, KKR, The Carlyle Group, Affinity Equity Partners, and PAG Asia Capital. Baring Private Equity Asia could well join them, having set the hard cap for its seventh vehicle – which is expected to close by the end of the year – at $6.5 billion. Appetite for large-cap pan-regional funds appears undiminished, with KKR recently launching its fourth flagship Asia vehicle with a target of $12.5 billion.

MBK’s plans were disclosed by New Jersey State Investment Council. The pension fund also gave performance data for MBK’s previous four funds up to June 2019. With a net IRR of 4.5%, Fund I – which closed at $1.56 billion in 2006 – seems to have failed to meet the 8% hurdle required to trigger carried interest.

The subsequent three vehicles had net IRRs in the mid to high teens. The firm’s $1.6 billion second fund, which closed in 2009, had net total value to paid-in (TVPI) of 2.19x and distributions to paid-in (DPI) of 2.14x. This compares to 1.31x (TVPI and DPI) for Fund I. The TVPIs for Funds III and IV – the former closed at $2.7 billion in 2013 and the latter at $4.1 billion in 2016 – were 1.67x and 1.2x, respectively.

The management fee for Fund V is 1.75% during the commitment period, and 1.5% thereafter, while the carried interest is set at 20%. The GP commitment is 2.75%. The strategy represents a continuation of that pursued by MBK since the team spun out from The Carlyle Group in 2005: control and co-control transactions – management buyouts, corporate carve-outs, strategic partnerships, take-privates, and roll-ups – in South Korea, Japan, and Greater China.

Recent activity in Korea includes a joint deal with Mirae Daewoo Private Equity to invest KRW333.6 billion ($286 million) in the China and Southeast Asia assets of Korean cinema chain operator CJ CGV and the KRW1.38 trillion acquisition of Lotte Corporation’s credit card business. MBK also purchased Belgian chocolate maker Godiva’s distribution operations in Japan, Korea, Australia and New Zealand in a deal worth more than $1 billion. Most of these operations are currently in Japan.

Earlier this year, the firm’s largest portfolio companies, Korean supermarket retailer Homeplus, abandoned plans to list and lease back some of its stores. It has since emerged that Canada Pension Plan Investment Board (CPPIB), which contributed $534 million in equity to the $6.4 billion acquisition in 2015, has written down the value of the investment.

New Jersey State Investment Council wants to invest up to $100 million in MBK Partners Fund V. It is also an investor in MBK’s previous fund. As of September, the pension fund had $78.5 billion in assets, of which 9.83% was in buyout and venture capital funds. Private equity is the best performing asset class on a three-year and a five-year basis.

New Jersey accesses Asia through separate accounts managed by Asia Alternatives, most recently committing $300 million in 2016. Meanwhile, it has direct exposure to RRJ Capital and Warburg Pincus’ China and Southeast Asia companion funds, as well as to MBK.

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• Topics
• Fundraising
• Buyout
• North Asia
• GPs
• LPs
• Asia
• MBK Partners
• New Jersey State Investment Council