Alternative Investments ’s 25 most influential people in What was a cottage industry 15 years ago is growing fast. AsianInvestor presents the key players who are driving Asia’s private equity industry to new heights. Compiled by AI staff; overview by Leigh Powell

he Asian financial crisis of it is generating a new need for capital 1997-98 catalysed the region’s among regional entrepreneurs. It private equity market. Cheap comes at a time when many companies assets and controlling stakes are being taken over by a younger in banks and companies were made generation of families more open to Tavailable to foreign investors under private equity. rescue programmes initiated by the Many of these companies are International Monetary Fund. In many also looking to expand, often across cases this was a novel change from a borders, and require the expertise and pattern of minority aiming connections that GPs offer. Add this all for a quick . up, and for experienced GPs with dry It’s easy to say Asia’s private equity powder, 2013 represents one of the best industry is immature, compared with opportunities in years to deploy capital. those of the US and , but over “You are going to see a group who the past 15 years it has come of age. It have survived, done well and will is now a professional, large-scale continue to move ahead and become business, not a cottage industry, and more successful and bigger,” says Tang participants can boast meaningful track Kok-Yew, chairman and managing records and skills. partner of Affinity Partners. Success breeds complacency, and the With that in mind, AsianInvestor boom years of 2005-2008 saw too much sought to identify 25 people who are money raised by financial sponsors, shaping the industry to come (listed WARREN ALLDERIGE focused on too-rosy forecasts for Asian here in alphabetical order). Some of Managing director and CEO, growth. The financial crisis of 2008- these are veterans and pioneers from the Pacific Harbor Group 09 has impacted PE in two ways. First, 1990s. Others are new players who Warren Allderige spent his early days the initial love of emerging markets, as bring innovation and different ways of trading pan-Asian credit – at outposts developed markets reeled, served to bid doing business. in , , Japan and up valuations and dramatically reduce PE strategies are diversifying. For – and for banks that include GPs’ average returns on capital. those with scale, whether globally or , where had served Secondly, for a variety of reasons, within big local markets such as , as head of the Singapore office. He the IPO market in the region has been the model is Blackstone, with fingers joined Amroc Investments Asia in 1999 damaged, particularly in China, where in many pies, including real estate, as president and one of two founding IPOs were responsible for most exits. infrastructure, private debt and hedge shareholders. He advised affiliates Southeast Asia’s equity markets have funds. (Although such firms exist on our Avenue Capital and TPG, as well as been more open but private equity is less list, we kept our focus on their private other notable regional clients on sourcing developed in these countries. So GPs equity business.) and transacting investments in Asian have had to turn to other types of exits. At the same time, the prospects are distressed debt. So, in several ways, the past few bright for dedicated funds with a focus He has been with Hong Kong-based years have been difficult for Asian on private equity styles (, for Pacific Harbor Group since 2006, when private equity, even as investor interest example) or a country or region. Still yet he co-founded it as a affiliate has risen, particularly among regional other PE firms are taking a track record with the Amroc Asia team at its core. institutions looking to diversify out and adapting it to new trends, such as The firm invests in Asian high yield, of home markets and secure long- cross-border M&A. In today’s low-yield special situations debt and participates in term returns. environment, investors are going to be the private lending market, and became But this year may be a turning point interested in all such strategies, provided an independent entity in 2011. for the industry. While the souring of they have confidence their money will Today Pacific Harbor has about global sentiment for emerging markets is be handled by a GP that delivers top- 30 people across additional offices in hurting investment in public securities, quartile returns over time. Singapore, , Bangkok, Manila,

38 AsianInvestor September 2013 www.asianinvestor.net , Taipei and Mumbai. It has the back of prime minister Shinzo Abe’s PHILIP BILDEN invested about $8 billion since inception. economic regeneration programme. Senior adviser, HarbourVest Pacific Harbor’s focus is around private Auerbach is one of the pioneers of Partners (Asia) lending, given that traditional sources of Asia’s private equity industry. He was a An early industry investor through financing are tightening credit lines. partner at Arral and Partners from 1987- funds of private equity funds in Asia, A slowing global economy and forecast 1994, a firm in Hong Philip Bilden is recognised as one of its interest-rate rises will likely mean that Kong associated with making landmark biggest promoters. He has spent nearly “lending will become more difficult and investments across the continent. He two decades endorsing it to global expensive to secure from international started out his career at Fidelity as an institutions and bringing capital to Asian banks”, says Allderige, while domestic equity analyst in Boston. PE. HarbourVest was among the earliest lenders are now typically taking longer to entrants, making its first investment in a approve loan applications. A combination JOSEPH BAE local fund manager in 1984. of factors has “sparked higher demand Managing partner, KKR Asia Bilden joined the firm’s Boston for short-term lending across Asia.” When KKR arrived in Asia in 2005, headquarters in 1991, relocating to Hong Hedge funds and private equity marked by the opening of offices in Hong Kong in 1996 to establish and head its firms are among the groups that have Kong and Tokyo, it was met with curious Asian headquarters. Under his lead as increasingly moved into the space, he fascination. While several of its global managing director, offices were launched notes, lured by potentially high returns. private equity peers had established in Tokyo (2010) and (2012). footholds in the region, KKR was a DANIEL AUERBACH, newcomer that had not done a single deal Managing partner, Fidelity Growth in Asia since its founding in 1976. Partners Asia Joseph Bae went on to oversee Industry veteran Daniel Auerbach has the firm’s ascension to heavyweight been at the helm of Fidelity’s Asian dealmaker status in Asia. It has invested venture capital and private equity more than $5.5 billion in PE deals in 30 activities for almost two decades. He has companies across the region over the overseen investments and exits, including past eight years. a partial sale of its long-held position A Korean-American, Bae has led in Alibaba as well as Hong Kong-based the firm’s regional expansion to seven offices, appointing native citizens as country heads. The strategy helped KKR to gain insights quickly and strike business partnerships in each country. Bae also played a central role in its latest feat: raising $6 billion for KKR Asian Fund II, which stands as the biggest pan-Asia PE vehicle to date. Its HarbourVest has invested $2.6 billion predecessor, which closed in 2008 at in Asia over the past three decades, $908 million, had a net IRR of 13.5% as expanding from an initial focus on at end-December 2012, according to US investments in private equity funds fund Calpers. to make secondary purchases of PE Having completed fundraising for assets and direct co-investments. It also it latest Asian fund, the next steps will manages capital for Asian institutional be to “step up our presence in core and investors. Bilden’s endorsement of Asian emerging markets, going beyond tradi- private equity did not waver during tional PE by branching out into services, volatile conditions following the Asian such as alternative credit”, says Bae. financial crisis. Asia Renal Care, bought by Bumrungrad Diversifying will give KKR flexibility in Bilden is modest about his International Hospital Group in 2008. generating deals with corporations and contribution to HarbourVest’s Other notable deals include Beijing family businesses. achievements in the region, largely telecommunications software giant Bae’s legacy may crediting regional team members and Asiainfo; IT service provider Isoftstone; extend beyond “the vision and early pioneering work China ringtone provider Hurray Asia, as he is of [the firm’s] founding partners”. Holdings; and Wuxi Pharmatech, a regarded as He adds that the Asia teams will research and development company. a potential continue to broaden in the coming Auerbach took seats on the boards of successor to years as the region undergoes “a each of these prior to the firm’s exits. KKR found- time of rapid expansion and growth”. He became managing director and ing partners Bilden transitioned to senior adviser managing partner at Fidelity in 1994. Henry at HarbourVest in 2012. He is based While the firm continues to research Kravis and in Hong Kong, where he focuses on China for future investments – Auerbach George building strategic relationships in Asia. is on the board of Hua Medicine, a Roberts. drug development company, and Delta CHOU CHIN Healthcare, a cardiovascular speciality Managing director, hospital under construction in Chou Chin epitomises institutionally – Fidelity is also eyeing Japan, which has branded private equity. He has been seen a resurgence in investor interest on involved in leveraged buyouts since www.asianinvestor.net September 2013 AsianInvestor 39 Alternative Investments

joining Morgan Stanley in New York Group – from a manager in 1987. He transferred to Hong Kong with $10 million in assets, to include in 1993 on the back of former Morgan private equity, real estate and distressed Stanley strategist Barton Bigg’s call to be investment businesses, with about $10 “maximum bullish” on China, and led billion in total AUM. the team that launched the firm’s first One of PAG’s most notable early Asia-dedicated fund in 1999, in the wake achievements was its 2006 acquisition of of the region’s financial crisis. Goodbaby, a Shanghai-based supplier Since then his team has provided of baby goods, which was China’s first consistently strong returns, according Western-style leveraged . Last to limited partners who invest with November, the firm closed its PAG Asia the firm, thanks to leveraging the I limited partner fund, raised and led investment bank’s client list. Recent by PAG chief executive Weijian Shan, examples include unilaterally negotiated at $2.5 billion. deals such as last year’s China’s Tianhe Shan, a former top dealmaker at TPG, in China and Japan, Southeast Asia Chemicals. “No GP knew about our deal joined forces with Gradel in 2010. He will likely feature more prominently until it was in the press,” Chou says. leads PAG’s private equity business and in the portfolio mix. Gross-Loh While competitors often complain is considered a key to the fundraising notes Bain’s focus is on improving success of Asia I LP. The pan-Asian portfolio companies “both with growth private equity fund – which focuses investments in China and India, where on large-scale buyouts and structured rapidly expanding businesses need transactions – attracted capital from help to manage that growth and build sovereign wealth funds, financial capabilities, or buyouts in Japan focused institutions and large pensions. on making businesses more efficient In 2010, PAG merged with property and competitive”. investment firm Secured Capital, creating the platform for its pan-Asia MICHAEL KIM BYUNG-JU real estate business. PAG today has Partner, MBK Partners 300 staff across eight offices in Asia. Michael Kim left Remaining true to his roots, Gradel in 2005 to establish his -based holds the modest title of managing firm to focus on North Asian buyouts, partner and chief investment officer of combining global best practices and PAG’s absolute return business. know-how with local nous. Just one year later he was named one of the 50 DAVID GROSS-LOH most influential figures in the region about high valuations, Chou takes pride Managing director, Bain Capital by FinanceAsia magazine, sister title to in the attractive prices his team achieves A 13-year veteran of Bain Capital, David AsianInvestor. when it makes deals – a reflection of the Gross-Loh oversaw the firm’s start in Asia. Since then, MBK has lived up to firm’s ability to spot opportunities, make He is a member of Bain’s Asia senior its promise and, with its third fund decisions and use its brand to convince leadership team and a founding member beginning to deploy capital, now has 20 entrepreneurs it can enhance their of its Japan office, which he helped to set companies in its portfolio, most of which business. “There are more attractive up in 2006. involve the intersection of Japanese deals in Asia than in the US or Europe,” Japan and China were initial target and Korean corporate expansion and says Chou, citing the mid-sized market. markets, as the Bain Asia Fund I, which Chinese economic growth. MBK set a “You want to be with companies that raised $1 billion in 2007, had a North template followed by the likes of Pacific you’d want to own over the long term Asia focus. Gross-Loh led several Alliance Group and Hahn & Co. without an IPO.” billion-dollar leveraged buyouts in More recently, MBK sees opportunity That requires patience, however – Japan, including the $2.5 billion deal for in helping Chinese companies to go sometimes Chou will work for years on a restaurant operator Skylark in 2011, a global, although its most recent high- deal that may never see the light of day. $1.1 billion bid for call centre business profile deal was winning a bruising battle But in a region where everyone seems to Bellsystem24 in 2009, and the $1.2 last year to acquire a 28% stake in water- be in a hurry, Chou and his team have billion purchase of television shopping shown how taking it slow can be a virtue. company Jupiter Shop Channel in 2012. Bain held steady in Japan during CHRIS GRADEL a severe downturn in 2011 after Founder and CIO for absolute an earthquake and tsunami stuck return, PAG the country’s northwest. It held a Alternatives firm PAG was founded recapitalisation for Bellsystem24 that in Hong Kong by Chris Gradel in year, helping to return capital to limited 2002 with humble roots and modest partners. Bain’s persistence will see ambitions. A decade later, after steady it make portfolio exits amid a bullish growth and hard-won success, it has market lifted by Abenomics. remained true to its origins as a diligent The firm has been taking a broader industry workhorse. approach to the region, as Bain Capital Gradel is credited with using his ear- Asia Fund II, which closed last year to-the-ground work ethic to build PAG at $2.3 billion, has a pan-Asia focus. – formerly known as Pacific Alliance While opportunities will still be sought

40 AsianInvestor September 2013 www.asianinvestor.net purifying company Woongjin Coway. “We believe [such moves] could provide studying investments in markets such Kim and his five partners continue unique opportunities to build strong as South Korea, India and Indonesia. to blaze a trail for financial sponsors. relationships and grow together with our DST is reportedly targeting $1 billion “We need an Asian form of private partners in the region,” Kim says. for DST Global III, which will invest equity investing,” Kim says, channelling Before CPPIB, she had already racked in late-stage tech companies with a Lee Kwan Yew’s argument that Asian up enviable experience, at Teachers’ valuation of at least $500 million. societies need to adopt US liberal Private Capital (part of Ontario democracy to suit their own purposes. Teachers Pension Plan) and The Carlyle RICHARD ONG His dictums: get the best local Group. Both roles involved making Co-founder and CEO, RRJ Capital management for a portfolio company; direct private equity investments in Asia. Over the past six years Richard Ong has don’t rely on leverage, particularly And CPPIB continues to seek talent, founded two firms that have collectively because local courts and regulators may particularly for its direct and co- raised more than $8 billion. He first frown upon its use if it proves harmful investment strategies – Kim sees this made headlines in 2007, when he co- to the company; don’t rely on cost- as the toughest challenge in Asian founded China-focused Hopu Investment cutting, particularly layoffs, to generate private equity. Management with fellow profits; generate value by increasing the banker Fang Fenglei. company’s top-line revenues. “We want The following year, Hopu raised to be job creators, or at least job-creation Founder, DST Global $2.5 billion, which is among the largest neutral,” Kim says. Moscow-born entrepreneur Yuri Milner fundraisings for a first-time private trained as a theoretical physicist before equity fund in Asia. The fund had KIM SUYI gaining an MBA from Wharton School reportedly generated an internal rate Asia head of private equity, Canada of Business. In the early 1990s, he of return of 46% as of the end of 2012. Pension Plan Investment Board worked as a Russian banking specialist at Hopu has backing from Temasek and Canada’s biggest state retirement fund the World Bank and later Bank Menatep. touted its guanxi, or Chinese networks, has been an active investor in Asian In 2005 he founded Digital Sky as a pillar for its deal-making prowess. private equity for several years. Some Technologies, now known as DST At Goldman, Ong was the bank’s C$4 billion ($3.8 billion) of Canada Global. He has made prescient Beijing-based co-head of Asia ex-Japan Pension Plan Investment Board’s global . Ong departed C$48 billion PE allocation is in Asia- Hopu in 2010 and teamed up with his Pacific assets – close to 2% of its C$189 brother Charles – former chief strategist billion in total AUM. of Temasek – to form Hong Kong-based Having established the Asian presence RRJ Capital. in 2008, Kim Suyi has been instrumental The Asia-focused RRJ Capital Master in building this exposure across funds, Fund I raised $2.3 billion in 2011, while secondaries, co- and direct investments. Fund II is said to have closed at $3.5 While it’s early days for much of CPPIB’s billion in March. While Fund II fell short Asia-Pacific private equity portfolio, of its reported $5 billion target, it took the fund has already made investments just seven months to raise the capital. alongside China Investment Corporation RRJ has support from institutions and Singapore’s GIC. including Temasek, China Investment Given CPPIB’s large, stable and long- Corporation, New York State Common term pool of capital, it is able to take Retirement Fund, Oregon Public calculated risks on deals. Moreover, it Employees Retirement Fund and Texas has backed respected investment teams investments in social media companies County & District Retirement System. to start new PE firms in the region – in- that have developed into global brands, Richard Ong keeps a guarded, low-key cluding the spin-out of including Alibaba, , , public profile. RRJ does not publicly investment pro- and . announce its fund closures and both fessionals from DST made its mark in tech investment brothers rarely comment to the press or Temasek to after helping to build a business that appear as RRJ representatives. As one form Foun- evolved into Mail.ru, one of Russia’s private-equity executive puts it: “They tainVest biggest web portals. It has been listed don’t need to.” in China, on the London Stock Exchange since from ICICI 2010 and has a market cap of about $7 JEAN ERIC SALATA Venture to billion. Milner stepped down as Mail. Founding partner and CEO, Multiples ru chairman in 2012 to focus on global Baring Private Equity Asia in India and internet investments. Jean Eric Salata is a pioneer, building from Gold- DST typically acquires small stakes in BPEA during the industry’s early days. man Sachs PIA privately held social media companies, It is now one of the most established, to Anchor in with the intention of being a long- independent private equity firms in Korea. term shareholder. It set up an office in the region, with over $5 billion in Hong Kong in 2011 to explore Asia AUM. In 1997, Salata established the opportunities. “One quarter of the regional Asian private equity investment world’s internet users are in China, programme for UK-based Baring the market is of huge importance for Private Equity Partners, later leading a us,” says Milner. While China – set to of BPEA in 2000. become the world’s biggest e-commerce Based in Hong Kong, it focuses on market – is of interest, DST is also pan-Asian middle-market private equity

September 2013 AsianInvestor 41 Alternative Investments

Samena raised $180 million largely consumer/logistics and financial services. from individuals for its first fund in In addition to its full-time investment August 2008, a month before Lehman team, Kedaara partners former CEOs Brothers collapsed. It is fully deployed who have built and managed some multi- and has returned 30% of capital so billion-dollar enterprises, including far. In June 2011 it launched fund II, Sanjeev Aga, former managing director targeting $700 million. To date it has of Idea Cellular; Aditya Birla Nuvo, raised $340 million and is anticipating chief executive of Birla Tata AT&T; final close this December. and Pramod Bhasin, former CEO of As Saraf notes, sentiment on India and Genpact and head of GE Capital in the , courtesy of the Arab India and Asia. spring, has not been hot. But Samena is Prior to Kedaara, Sunish Sharma was diversifying, launching a $100 million a managing director and senior member angel fund that seeds other managers of the India investment team at private deals, across growth equity and mid-cap and a $209 million credit business. equity firm General Atlantic. From buyouts. The firm targets investments Of its overall $765 million, private 2004, he played a leading advisory role across sectors and regional markets, equity accounts for about $470 million. in the majority of GA’s investments, but has made a mark in Asian emerging Samena is also looking to deploy $82 and helped to grow the firm’s local markets, particularly India and China. million from its management company Indian investment programme to $1 While some of its mid-market peers into “synergistic platforms where we billion by late 2011. He previously have piled into consumer brands, BPEA worked as a consultant at McKinsey & has taken a more considered approach, Company, focusing on strategic issues investing in companies that include and M&A transactions. cement-maker Lafarge India, Chinese Sharma has extensive private equity gas producer Asian America Gas Energy, experience, spanning business services and Hong Kong-based Nord Anglia and technology, health care, financial , which operates private services, energy and resources. schools in emerging markets. As a testament to the strength of EDWIN SOERYADJAYA BPEA’s franchise, the firm raised $2.46 Co-founder and chairman, billion for Baring Asia Private Equity Saratoga Capital Fund V in the aftermath of the global Indonesia’s biggest private equity financial crisis. The fund held a final firm has built success on investing in close in early 2011, exceeding its $1.75 the country’s natural resources and billion target, and with $1 billion in infrastructure sectors. With $1.3 billion, oversubscriptions. acquire other businesses”. Samena has Saratoga Capital was founded in 1998 by Having raised money and invested in its headquarters in Dubai and advisory Edwin Soeryadjaya and Sandiaga Uno. companies through the Asian financial offices in London and Hong Kong. It has It managed the duo’s money and raised and global crises, Salata adheres to an investment team of 12. more via private investors. a strategy focused on improving Soeryadjaya is viewed as innovative businesses. “In today’s global economic SUNISH SHARMA and entrepreneurial. He spent 15 years environment,” he says, “the private Managing partner, Kedaara working for automotive manufacturing equity firms that will succeed will be the Capital Advisors conglomerate PT Astra International, firms that are successful in making their Fundraising has been difficult for Asian which his family lost control of in 1993. portfolio companies more efficient” private equity funds. Yet Mumbai-based He then set up his own investment while improving their value. Kedaara Capital Advisors hit its $500 company, L&M Group Investments, million target for its first fund, with the which was folded into Saratoga in 1998. SHIRISH SARAF final close due in October. Saratoga focuses on investments in Founder and vice-chairman, It secured an unspecified sum from early- and growth-stage companies and Samena Capital Ontario Teachers’ Pension Plan, special situations, but its investment After leaving Abraaj Capital, the firm he which marked the Canadian fund’s horizon tends to be longer than the co-founded, in 2007, Shirish Saraf was first investment in India. That speaks typical PE fund. It often holds stakes living the dream, flitting between homes volumes for Kedaara’s in companies for years after listing. Its in London and Goa and contemplating co-founders, Manish portfolio includes holdings in coal writing a novel. But by June 2008 he had Kejriwal and brothers miner Adaro Energy, telecoms firm turned the genesis of an idea into Samena Sunish and Nishant Tower Bersama Infrastruktur Capital, uniting entrepreneurs from Asia, Sharma. and palm oil plantation operator the Middle East and Africa. The firm focuses Provident Agro. “Never before has there been such on carve-outs, More recent deals include a cross-synergisation of networks in buyouts and growth stakes in smaller concerns such as emerging growth markets,” says Saraf. opportunities in domestic carrier Mandala Airlines The firm aims to unlock value through sectors including and integrated automotive firm the acquisition of stable businesses business process Mitra Pinasthika Mustika. with steady cash flows. It targets outsourcing Indonesia is widely cited now as consolidation opportunities, increasingly and IT services, over-hyped and expensive and has cross-border. “For that you need a series pharmaceuticals, suffered foreign investor outflows of networks and relationships,” he says. health care, amid the broad emerging

42 AsianInvestor September 2013 www.asianinvestor.net investment in fund IV, paying $238 TOW HENG-TAN million to SK Telecom Group for CEO, Pavilion Capital a controlling 53% stake in Loen When Singapore state investor Temasek Entertainment, which Tang describes as Holdings, an active player in private the iTunes of Korea. In fact, Affinity has equity, creates a new entity, the market become closely associated with Korea, takes notice. That was the case with where it has sourced a number of deals. Pavilion Capital, launched in early The firm employs over 50 people 2012 to invest in privately held firms in across six Asia-Pacific offices. Its North Asia, primarily China – just as it favoured sectors are food and beverage, was with Seatown, the S$4 billion ($3.1 consumer goods, financial services and billion) hedge fund unit set up in 2010 (as industrial companies. revealed in an AsianInvestor scoop). Tow Heng-Tan, formerly Temasek’s TAY LIM-HOCK President, GIC Special Investments Singapore GIC Private, formerly known as Government of Singapore Investment Corporation, is widely viewed as one of the most sophisticated private equity investors. It is also among the biggest, via its GIC Special Investments unit. According to markets sell-off. Poor sentiment hurt its new policy portfolio, as unveiled last Saratoga’s IPO on June 26. But that is month, the fund allocates 11-15% of its unlikely to stop a man who knows his estimated $250 billion – as much as $37.5 domestic market and is in it for keeps. billion – to private equity. As head of GIC Special Investments, TANG KOK-YEW Tay Lim-Hock oversees an asset Chairman and managing partner, universe of buyouts, venture capital and Affinity Equity Partners special situations, such as mezzanine Born in Malaysia, KY Tang became an and distressed debt, and secondaries. CIO, is the man overseeing the entrepreneur by default. He had worked Investments are made through funds as investment of Pavilion’s reported S$2.5 as a banker and manager all his life, well as directly. billion. The unit focuses on small and including as chairman of UBS Capital, GIC says its direct investment medium-sized enterprises, so limited the private equity arm the Swiss bank set programme is focused on taking deal size is one reason why it only up in 1998 after the Asian financial crisis. minority equity positions as well as accounts for 1.2% of Temasek’s S$215 Following the dotcom bust, Tang span the providing mezzanine financing in billion portfolio. The SME focus is unit out to create Affinity Equity Partners buyouts. Its funds strategy “aims to also in keeping with one of the goals of in 2004. “Looking back it was the best identify and invest with leading private China’s five-year plan for 2011 to 2015. thing that happened to me,” he says. equity and venture capital funds Tow has been with Temasek Affinity has five partners, four of globally, and grow with them in since September 2002, having whom were with it at spin-off. It has the long run”. started his career with then fully invested three funds and fully Tay has been with GIC Special Coopers & Lybrand, before exited two. Today it is raising its fourth Investments since 1995. He has joining as an fund, expected at $3.5 billion. Overall, done stints in Europe (as head of investment banker and working Tang says Affinity will be managing the European private equity team) at Lum Chang Securities as over $6 billion before the year is out. Its and the US (running the US private a managing director. He is strategy is based on long- equity team), and became president also a director on the boards term fundamentals. It takes controlling of the unit in July 2011. of Singaporean corporations stakes, frequently 100%, and adopts an GIC commands a wide Keppel, ComfortDelgro active approach. “We tend to buy good sphere of influence and Surbana. companies with good in the private equity Ramping up exposure to management and world, having built SMEs in China and North make them a network of over Asia underlines Temasek’s better,” says 100 active private pioneering approach Tang. equity managers. – and will be a useful It holds And its international diversifier as it expands its investments reach continues to allocation to regions such for five to broaden, with plans as Europe and North six years and to open a Brazil America. With offices Munshi Ahmed primarily office to add to planned in London exits via its eight locations and New York, adding trade sale to outside Singapore – to a series of offices strategic buyers. in Beijing, London, throughout emerging It has just made Mumbai, New York, markets worldwide, its first San Francisco, Seoul, the fund continues to

Photograph (top): Shanghai and Tokyo. broaden its scope.

September 2013 AsianInvestor 43 Alternative Investments

DENIS TSE the Asian financial crisis has resulted in They were the first to figure out Hong Head of Asian private investments, much-increased foreign interest. That Kong-listed red chips enabled investments Lockheed Martin Investment helped Northstar to reach $1.2 billion in into and exits from state-owned Management AUM, after closing its latest fund at $820 enterprises (SOEs), while keeping de- Few overseas institutions have the million in October 2011. facto control and enabling international resources to put together teams on the The firm invests around 75% of its liquidity and professional expertise. ground in Asia. Yet funds, particularly assets in Indonesia and 25% elsewhere CDH is a true collection of private those facing high investment-return in Southeast Asia. It is also now the partners. This is reflected in a diverse targets, need to increase their exposure. portfolio with a strong private-sector Denis Tse believes there is demand orientation and commitment to buy- among corporate funds as well as state- outs. But the model is changing. backed ones to get involved as limited New deals focus on services, not partners with a local presence, but manufacturing, with emphasis on full finding talent is difficult. control and operations. US aviation and defence company The firm is even starting to Lockheed Martin’s experiment with leverage, such as by took that step in 2009 by hiring Tse floating a convertible bond to to help it invest privately into Asian the acquisition of listed firm New Focus financial sponsors. “We were the first Automotive. “It’s going to be hard to US corporate plan to establish an office achieve a 25% IRR without leverage,” in Asia,” says Tse, who operates out of Wu says, noting this is common in Hong Hong Kong as a one-man band. Kong but new to Chinese private equity. Such a model can help limited “You need to control the subsidiaries to partners avoid the costs of investing Indonesian partner of Texas Pacific make this work.” in funds of funds or via separate Group, with which it has worked on CDH is at the forefront of taking accounts. It also allows more intimate deals including investment in coal miner Chinese firms global. With Goldman intelligence gathering. Adaro Energy. Tse looks for PE managers with Examples of Northstar deals include unique ideas who can execute on them. a reverse takeover by listed investment Changes in China are throwing up Delta Dunia of mining opportunities for general partners and contractor Bukit Makmur Mandiri their backers. Tse prefers managers Utama. The transaction later lured co- who can obtain control, or who can investors including China Investment “intervene influentially”. He also likes Corporation, GIC and TPG. Other managers that are more interested in successful investments include those in helping local or foreign companies grow convenience store chain Alfamart and and expand cross-border. Bank Tabungan Pensiunan Nasional. The best opportunities, says Tse, Walujo is happy to see increased are in sectors being opened foreign recognition of Indonesia’s to foreign participation potential, despite recent investor in China, such as media outflows and concerns the market is and entertainment. “Few over-priced. Sachs, it is an investor in pork producer managers have insight in But accessing good talent is tough, Shuanghui International, which this these sectors,” he says. especially as his first choice is to hire spring boldly moved to acquire US- If Tse’s bets pay off, he locally. “The supply of talent is not based Smithfield Foods. If successful this will not only have helped growing as fast as demand [for PE would show how private equity benefits private equity move into assets] or investment opportunities,” industry in China, and the world. new areas, but also have says Walujo, who himself has worked set an example that should for Pacific Century Group and REBECCA XU encourage more Western Goldman Sachs. Co-founder, Asia Alternatives corporate pensions to hire This Hong Kong-based Asia specialists. WU SHANGZHI fund of private equity funds Chairman and managing manager became the first PATRICK WALUJO partner, CDH Investments offshore limited partner to Founder and MD, Wu Shangzhi was sent to the US receive a qualified foreign Northstar Group to study and quickly realised he limited partner (QFLP) A veteran when it wasn’t very fond of engineering, licence from China in 2011. comes to investing in but did like business The firm’s foresight to apply Indonesia, Patrick management. After and begin investing Walujo set up several jobs in finance early on is a key reason Northstar Group in he joined CICC and behind its fundraising 2003 with Glenn set up its private equity success – last August it Sugita and raised a department. His first hire raised $1.5 billion for a first PE fund in 2006. was an analyst, Zhao Jun, third fund of PE funds Back then Indonesia who became his partner as and managed accounts, was a tough sell. But they spun out the desk as focused on the its recovery since CDH Investments in 2002. growing pool of

www.asianinvestor.net renminbi-denominated vehicles in China. investments and co-investments in over emerging trend of consolidation. The Co-founder Rebecca Xu says this 30 companies in the region as of June 30. fact that target businesses are not market has exceeded the US dollar Carlyle Asia Partners IV is in the enjoying the same expansion means they market in the past two years. “In our market aiming to raise $3.5 billion by aren’t worth running, and won’t attract mind it’s not just about what we can year-end. Predecessor fund III, which capable executives, unless companies do today, but also about the long-term closed at $2.5 billion in 2010, had a gross can be combined to create scale. “This potential,” she says. internal rate of return of 11% and net is a new theme,” Zhang says, citing Another focus is to add more IRR of 5% as of June 30, by its second education, tourism and health care as underlying funds that provide ample quarter earnings report. target industries. liquidity. “We have many funds that hold Yang notes that Asia is an attractive their investments for three-to-five years market for Carlyle, given the increasing JOHN ZHAO and aim for a higher return multiple in rate of urbanisation and a growing CEO, Hony Capital the end,” says Xu. “To balance the lack of middle class. “In many industries, we Since John Zhao founded Hony Capital liquidity in the early part of these funds’ will also see consolidation and corporate in 2003 it has become the most successful lives, we’re also looking for strategies rationalisation take place,” he says. “We Chinese private equity fund by assets that target producing earlier liquidity,” expect to see more interesting investment raised, attracting more than $7 billion. It including special situations funds. opportunities.” Carlyle is seeking to help is also the first buyout fund established in The majority of firm’s investors are Asian companies expand globally. China. It is backed by Legend Holdings, based in North America, but more money owner of Lenovo, and committed early is being sourced from Asia and Europe. ZHANG YICHEN to buy an asset management company Xu leads Asia Alternatives’ Beijing Chairman and CEO, Citic office, jointly overseeing the firm’s Capital Partners investments in expansion and growth Arbitraging bonds in New York in the capital funds with a focus on China. 1970s gave Zhang Yichen a taste for taking Before co-founding Asia Alternatives principal risk. As his career progressed via with Melissa Ma in 2006, Xu worked as a a Hong Kong , Merrill Lynch senior investment officer at International and Citic Pacific, he worked in many Finance Corporation. capacities but always wanting to focus on alternative investments. XD YANG By 2006 Citic Pacific let him spin Managing director and co-head, off Citic Capital in Hong Kong as a Carlyle Asia Partners multi-asset platform, including private Carlyle made its first acquisitions in equity as well as venture capital, real the region in the depressed conditions estate and hedge funds. Unlike other overseeing bad bank loans. following the Asian financial crisis. After start-ups, Citic Capital retained an Hony’s pedigree and relationship with the US market took a similar turn at the institutional set-up, and continues to regulators, combined with its track record rely on the Citic brand to leverage of privatising state-owned enterprises deals in Greater China. This is one and making them profitable, has seen it reason why Citic Capital has not veered take a leading industry position. Now into public-market funds: “Our brand Zhao is using his SOE credentials to take wouldn’t give us any advantage,” Zhang Chinese companies across border (almost says. The group now runs around $5 all Chinese overseas M&A involves state- billion. Citic Capital’s main China backed entities). PE fund focuses on control deals with This began in 2008 when Hony operational intervention. Zhang says backed portfolio company Zoomlion to more entrepreneurs are open to buyouts acquire an Italian concrete machinery because slower economic growth has manufacturer. Since then it has added undermined the IPO model and eroded a Singapore-listed biosensor-maker valuations. Also, when the growth was and a start-up Japanese hospitality and there, founders were happy to immerse property group. their lives into a business, but these But dealmaking has slowed. Last start of this century, Asia was seen as the days entrepreneurs aren’t being year Hony was involved in two failed region that would prevail, driving growth rewarded as much. bids. It teamed up with TPG to acquire in the West. XD Yang joined the firm’s Zhang is at the forefront of an a Japanese chipmaker, but lost out Hong Kong operations in 2001, putting it to a strategic buyer. Then it made a on the course of regional expansion as it bid with another Chinese PE group, pursued deals in a growing Asian market. CGS Capital, to acquire Dexia’s €80 Yang led Carlyle’s $800 million billion ($107 billion) asset management investment in China Pacific business; at some point Hony backed Group between 2005-07. It exited out, and this summer Dexia called it off. the company this January, netting an Return on capital among Hony’s other estimated $4 billion profit – one of the portfolio companies are in decline, in firm’s most profitable investments. line with other big China PE funds. Over the past 12 years, Carlyle Helping Chinese companies to go has made its mark in markets such as global was never going to be easy and , India and Taiwan, investing the industry is looking to a networker across sectors. It had made $6.4 billion in like Zhao to make it happen. n www.asianinvestor.net September 2013 AsianInvestor 45