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April 19, 2012 9:47 am
Private equity firm TPG is on its way to a $1.5bn first close in the fundraising for its latest Asian fund, with an eventual goal of at least $4bn, according to people who attended its annual investor meeting at the Four Seasons Hotel in Hong Kong this week. The largest investor is likely to be Government of Singapore Investment Corp, which also has a stake in the TPG management company.
TPG’s fundraising comes at a time of stiff competition both from other international firms such as KKR, and an increasing number with local roots, such as Charles and Richard Ong of RRJ Capital or Frank Tang of Fountainvest. The competition for deals and money also comes from thousands of domestic funds in markets such as China, where private equity has become a primary source of funds in the face of constrained bank lending.
TPG’s executives, led by its co-founder David Bonderman, told investors at the gathering on Tuesday that they plan to invest up to 30 per cent of the new fund in China, an ambitious goal.
“The story has come together more than we expected,” says one consultant to major sovereign wealth funds and pension funds who attended the gathering.
Prior to the meeting there had been a lot of scepticism among investors about the strategy for Asia, given the high level of competition, and turnover in TPG’s Asian team.
But TPG has managed to turn around some of the more troubled firms in its current $4bn Asian fund, such as Unitrust, a Shanghai-based finance and leasing company, and dramatically improve results at others. For example, its current Asian fund contains Daphne, a shoe retailer where sales have been growing at 20 per cent each quarter, largely because of sophisticated inventory management systems that TPG’s operations team installed at a time when the growth in comparable retailers is a mere 3 per cent, according to Ricky Lau, a TPG staffer with responsibility for the deal.
The firm also plans to focus more on Korea at a time when many others have concluded that there is little to be gained there given the resistance to foreign investment, in part because of a tie-up with Vogo Partners, a local investment firm.
TPG is also one of the few private equity firms that has at least partly made headway in India, where its relationship with the Shriram Group has led to several successful investments – though the firm lost more than $30m last year when it put money into Lilliput Kidswear, a retailer that turned out to have massive accounting issues.
Meanwhile TPG, like many of its rivals, continues to regard Japan with frustration. The firm has spent enormous effort in transforming its Japanese toymaker, Takara Tomy, into an international rather than domestic firm and is in the auction for failed chipmaker Elpida next week. But Mr Bonderman told the gathering that “glaciers move faster than Japanese make decisions”.
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