Baring Private Equity Asia said yesterday that it closed the Baring Asia Private Equity Fund IV, a $1.52 billion private equity fund.
Baring Asia now has $2.5 billion in assets under advisory and this latest fund is three times the size of the Baring Asia III fund it closed three years ago. That has performed well, with a net IRR to investors of 126% as of March 31, according to Baring Asia.
The current fund, which had an original target of $1 billion, was heavily oversubscribed and so Baring Asia raised its hard-cap limit to account for the high investor demand.
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“We could have raised substantially more capital, but we decided to size the fund to enable us to target mid-sized growth equity deals, which in our opinion is where the best investment opportunities are today, particularly in China,” says Gordon Shaw, managing director based in Shanghai. Shaw continues: “We are seeing more high-quality investment opportunities today than we have for years.”Jean Eric Salata, Hong Kong based founding partner and CEO of Baring Asia, adds: “Existing investors from our prior fund increased their commitment by 154% to Baring Asia IV, and over 40 new institutional investors also invested in the fund. We consider this particularly encouraging, given the current investment environment.”
There are a total of 52 investors in the new fund. Forty eight percent of the investors come from North America, 26% from Asia, 17% from Europe, and the balance from Africa and the Middle East.
Forty two percent of the investors are from pension funds, 28% from funds of funds, 12% from financial institutions, 6% from endowments, 5% from high-net-worth individuals or family offices, and the balance from other businesses.
Existing investors who have re-invested in Baring Asia IV include Pennsylvania Public School Employees Retirement System, Pantheon, and Global Investment House. New investors include Ontario Municipal Employees Retirement System (Omers), Partners Group, University of Texas Endowment, and Universities Superannuation Scheme of the UK, and Goldman Sachs Asset Management.
Investment Strategy
Baring Asia said Fund IV will deploy the same investment strategy it used in its previous fund, which means it will target growing businesses in Asia with enterprise values between $100 million and $500 million that require capital for expansion, recapitalisation or for M&A purposes.
Baring Asia IV will target companies in the alternative energy, media, financial services, consumer and industrial sectors with operations primarily in China and India, but it will also look at companies in Japan, Singapore, Hong Kong, Taiwan or Southeast Asia.
“At a time when highly leveraged US and European buyouts are starting to show signs of stress, private equity funds focused on growth investing in Asia, a strategy which largely does not use financial leverage, are continuing to attract interest from around the world,” says Salata.
He says that while funds normally look to invest over a three-year period, Baring Asia has already invested 30% of this fund (the first closing of the fund was last year, this is the final closing, hence there was money available to invest). But he expects it will be fairly easy to pick and chose investments as the "deal flow right now is robust" given the slowdown in interest for IPOs, debt and even bank lending.
"I think today there is much more demand for investments than we anticipated," says Salata. "So I am confident about the ability to deploy the capital in the next couple of years."
Some of Baring Asia's recent transactions include its April $43 million investment in Solar Giga, a solar energy producer in China, and its February $65 million investment in Sharekhan, an Indian financial services company.
Source: Finance Asia