HONG KONG, May 13 (Reuters) – Baring Private Equity Asia has raised nearly $1.52 billion for a fund targeting mid-sized growth companies in the region, showing investor appetite for Asia remains strong despite a slowing global economy.
Baring said on Tuesday that the new vehicle, which it described as the largest regional growth equity fund ever raised for Asia, would be particularly keen to invest in companies in the alternative energy, media, financial services, consumer and industrial sectors.
About 30 percent of the fund has been invested already, Chief Executive Jean Eric Salata told reporters, noting deal flow was the strongest it had been in years as mid-market companies in Asia lack alternatives for funding amid volatile financial markets.
“The IPO markets, as most of you know, are essentially closed right now except for a very limited number of companies … and the banks have tightened credit both in China and in India,” Salata said.
“There's probably more demand than we anticipated. We feel the timing is actually quite good for this fund as far as the ability to invest.”
Transactions done by Baring Private Equity Asia this year included a $43 million investment in China's Solar Giga and the acquisition of Japanese payroll outsourcing company Pasona ADP Payroll from Automatic Data Processing Inc (ADP.N: Quote, Profile, Research) and Pasona Group Inc (2168.T: Quote, Profile, Research).
According to data from the Asian Venture Capital Journal (AVCJ), the region's private equity industry largely shrugged off last year's global credit crunch, with assets under management, fundraising and investment rising at double-digit levels.
It said Asian private equity funds under management rose by 14 percent to $190.7 billion last year, while new investments rose 33 percent to $84.2 billion in 2007 and funds raised to invest in the region rose more than 23 percent to $50.9 billion.
However, many buyout funds have had difficulty completing takeovers in the region and are settling instead for minority stakes. Salata said most of the new fund's investments were likely to be growth capital as opposed to tradional buyouts.
Salata said the 52 investors in the new fund included the Ontario Municipal Employees Retirement System (OMERS), Partners Group, University of Texas Endowment, Universities Super Annuation Scheme of the UK, and Goldman Sachs Asset Management.
The Baring Asia Private Equity Fund IV will target companies with enterprise values between $100 million and $500 million with a particular focus on China and India, as well as Japan, Singapore, Hong Kong, Taiwan and Southeast Asia.
The fund will target returns of 30 percent a year, Salata said, adding that probably 60 percent of investments would be completely unleveraged.
The Hong Kong-based executive warned returns were unlikely to match the performance of its Baring Asia Private Equity Fund III, which closed in August 2006 and raised $490 million. That fund had a net internal rate of return of 126 per cent as of the end of March, Salata said.
“What Asia has going for it is that underlying growth in businesses here is higher, and that should drive higher returns,” Salata said.
Baring Private Equity Asia, which was established by a management buyout in 2000, said it now has about $2.5 billion in assets under advisory.
Its competitors in the region include Kohlberg Kravis Roberts & Co [KKR.UL], CVC Asia Pacific [CVC.UL], Carlyle Group [CYL.UL] and TPG [TPG.UL].
(Reporting by Jeffrey Hodgson and Tony Munroe; Editing by Kim Coghill)