EQT, TPG funds reflect Asia’s PE power
Asia's growing significance in the private equity world was further confirmed in two separate fundraising events last week. First in Europe, where EQT Partners announced that Asia Pacific LPs were responsible for nearly one quarter of total commitments to its latest vehicle. Then in Asia itself, where it emerged that TPG Capital was about to launch the largest regional fund since the global financial crisis.
The Europe-focused EQT VI fund reached its hard cap of EUR4.75 billion ($6.5 billion) after nine months in the market, having originally targeted EUR4.25 billion. The biggest fundraising effort in Europe since 2007, it is expected to be trumped by BC Partners' EUR6.5 billion vehicle in the coming weeks as many of the global buyout firms return to the market.
Investors in Asia Pacific put in 23% of the total capital, compared to 7% in the previous vehicle. With Middle East and North American investors contributing 5% and 22%, respectively, it is the first time European LPs haven't accounted for the majority of an EQT fund. It is presumably no coincidence that the spike in Asian representation coincides with an increase in the sovereign wealth fund and pension fund share to 53%, compared to 31% previously.
TPG is preparing a $4-5 billion Asia-focused fund for launch in mid-October. The private equity firm is already responsible for the region's largest vehicle to date, the $4.25 billion TPG Capital Partners V, which closed in 2008 and is now 75% deployed. According to AVCJ Research, the principal LPs in the fifth fund include Autorité des Marchés Financiers, the California Public Employees' Retirement Scheme (CalPERS) and the Canada Pension Plan Investment Board.
The impending fundraise reflects the strong demand among global investors for Asia-focused funds. According to Preqin, the region accounted for 12% of global fundraising in 2003; this had risen to 21% for January-August 2011.
The largest funds raised in the last two years are Carlyle Asia Partners III, which closed at $2.55 billion in April 2010, and Baring Private Equity Fund V. The latter vehicle took just six months to secure $2.46 billion in commitments, against an original target of $1.75 billion, closing in January 2011. PAG Asia I reached a first close of $1.7 billion in July and is targeting $2.5 billion in total.
Firms about to enter the market reportedly include KKR, which raised a $4 billion Asia fund in 2007 and is planning a $4-6 billion second vehicle, while Bain Capital announced its second regional fund in June and is looking to raise more than the $1 billion it secured first time around. Morgan Stanley is also preparing a new Asia fund, which is expected to be $1.5 billion.
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