KKR raises $6bn for Asia fund

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Share Clip Reprints Print Email Last updated: December 17, 2012 3:08 pm

KKR raises $6bn for Asia fund

By Henny Sender in Hyderabad

KKR, the US private equity group, has achieved its goal of raising $6bn for its new Asia fund, according to people familiar with the matter, making it the largest fund focused on the region. KKRs success is striking as it comes at a time of growing scepticism about t he ability of private equity groups in both developed and developing markets to put large amounts of capital to work. More
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That uncertainty has been particularly focused on deals in China as mainland growth has slowed and amid intense competition from local funds whose founders are often politically well connected. Moreover, Chinas quota system for listings and a sluggish stock market mean selling investments in mainland companies by taking them public on the stock exchanges in Shanghai or Shenzhen is a challenge. In addition, some private equity investments have been tainted by suspicions and allegations of fraud. But the scepticism is not confined to China. Few deals have been done in Indonesia, for example. Carlylewaited 10 years before finally being able to put a small amount of money to work there. Bain and TPG have had problems with accounting irregularities in India, an issue that people familiar with the matter said prompted both to quit the board of apparel maker Lilliput Kidswear last year. Bain and TPG declined to comment. Anti-foreign sentiment can also play a part. For example, when Oriental Brewery, a KKR-backed company based in South Korea, secured government permission to raise beer prices, it became the object of a buy-local campaign urging a boycott of its brands in favour of locally run beer companies. KKRs Asia team, led by Joe Bae, David Liu and Sanjay Nayar, is highly regarded. Mr Liu is one of the few China investors who has his home on the mainland rather than in Hong Kong, helping the company emphasise its local ties. It has been able to raise money for investors ranging from a local fund of funds, Asia Alternatives, to the US state of Washington. The KKR team has been very stable, commanding a unique combination of global institutional training and local knowledge and expertise, says Rebecca Xu a founding partner of Asia Alternatives, which invests in private equity groups with an Asian portfolio.

KKRs competitors have a more patchy record in the region. Outside India, for example, Blackstone is largely invisible, as a result of the paucity of meaningful buyout deals, according to Blackstone partners. Bain was able to raise $2bn earlier this year while Carlyle is in the early stages of fundraising for its latest Asian fund. TPG, which has one of the longest histories in the region, has been having trouble reaching its goal for its latest Asia fund, thus far raising more than $1bn, say investors, but still well short of its $4bn target despite repeated visits to the region by co-founder David Bonderman. That difficulty reflects problems in TPGs Asian and US portfolios. Those were highlighted on Monday when Chinese sportswear maker Li Ning, one of TPGs portfolio companies, warned it would post a loss for the year and said it was buying back inventory despite booming consumer demand in China. Shares in Li Ning are down more than 20 per cent so far this year.
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