KKR, the New York-based private equity group, has raised $9.3bn for an Asian-focused private equity fund, the largest of its kind for buyouts in the region, in the latest sign of demand from yield-hungry investors.
The world’s largest private equity groups are raising record-breaking funds this year as investors seek to place their cash with top-performing firms given poor returns offered elsewhere in a low interest rate environment.
Earlier this week, CVC Capital Partners set a record for the largest regional fund that has been raised by a European group. The Luxembourg-based group raised more than €16bn.
On Friday, KKR said it had attracted investors for its latest vehicle from pension funds, sovereign wealth funds, insurance companies, endowments and family offices. The fund is KKR’s third pan-Asia investment vehicle. In 2013, it raised $6bn, which at the time was also a record for the region.
KKR’s new fund will focus on corporate carveouts in countries such as Japan, the group said in a statement. After raising its last fund in 2013, it bought a majority stake in Panasonic’s healthcare business for about Y165bn ($1.67bn).
The group will also look for chances to partner with regional companies on cross-border deals. It has already capitalised on China’s strong appetite for overseas assets. Last year, KKR sold its 45 per cent stake in Australian cancer care provider GenesisCare to a Chinese investor consortium led by China Resources.
Private equity buyouts are increasingly common in Asia. Between January and April, 125 buyout deals were struck worth $35.6bn in the region, an increase of about 20 per cent on the same period the year before, according to data from Mergermarket. Asian exits from investments in the first four months of the year earned private equity funds $14.2bn, a 10 per cent increase.
Several of the world’s largest groups have closed record-breaking funds in the past year. In January, Permira raised €7.5bn and last year Cinven closed its largest-ever fund at €7bn.
A robust fundraising environment is being driven by investors looking for returns, causing a scramble to back the top-performing private equity funds. Hedge funds have recently also fallen out of favour with investors, some of which are reallocating capital to private equity.
But some large institutional managers are concerned funds are becoming too big, and warn that managers will end up overpaying for assets and could eventually make bad investment decisions.
“Valuations are very rich at the moment,” said an industry executive. “Someone will end up overpaying as we expect a correction to come, but nobody knows when.”
Source: Financial Times
