HONG KONG (Reuters Breakingviews) - Blackstone is more famous as a seller to Asian buyers than a private equity investor in the region. That could all be about to change. The firm plans to raise up to $3 billion for its first Asia private equity fund and could raise more, according to Reuters. The timing looks smart, but it won’t be a cakewalk.
Asia-focused private equity funds have scooped up a combined $32.5 billion so far this year, nearly 80 percent of the $42.5 billion raised for all of 2016, according to Preqin. It’s a turnaround from last year, when Asia, unlike North America and Europe, suffered its worst year for fundraising in three years. This was likely due to China’s slowdown and the corresponding effects on currency and equity markets earlier on in the year.
Some worry that there is too much money chasing too few deals in Asia. Yet KKR hasn’t struggled to put its money to work, and raised a further $9.3 billion in June. TPG is said to be looking to add more than $4 billion to that figure for its own offering, Reuters reported. U.S. markets have become very expensive for private equity firms as equity markets have rallied, making Asia look comparatively attractive. Rich equity market valuations are luring big institutional investors like Temasek to invest more in private markets, and less resourced investors such as public pension funds tend to follow along. This should also benefit private equity firms. Corporate buyouts in Asia, a market famous for growth investments, are also on the rise.
Blackstone’s global private equity fund has previously invested predominantly in the U.S. and Europe; there was little pressure for it to invest in Asia. However, Reuters reported that the global fund will contribute around 40 percent to the investments that the Asia fund makes, meaning any volatility or correction in Asia – which some worry is imminent after a long liquidity-fuelled rally - could skew the global fund’s returns.
Blackstone does come a bit late to this party. KKR, Carlyle and TPG have all raised dedicated funds for Asia already. Yet Blackstone’s brand is likely to make its fundraising relatively painless. It remains to be seen whether performance will put the firm ahead of its rivals.
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