Advent’s new mega-fund to invest up to $2.6bn in Asia

The US private equity manager has hit the $13 billion hard cap for its eighth global fund, of which as much as 20% could be deployed in Asian assets.
Advent’s new mega-fund to invest up to $2.6bn in Asia

Private equity firm Advent International could allocate as much as one-fifth of its newly raised $13 billion global fund to Asian assets, AsianInvestor has learned.

The Boston-based manager said yesterday that it had reached the hard cap for GPE VIII, beating its $12 billion target, after six months in the market. This raises its total assets under management to $42 billion.

Advent has no regional deployment targets, but has earmarked up to 20% of GPE VIII for markets outside Europe and North America – namely Asia and Latin America – said Filippo de Vecchi, co-head of Greater China.

It would be logical to assume that Asia will receive a decent portion of this $2.6 billion, given that Advent is currently investing its sixth Latin American fund, a 2015 vintage with $2.1 billion, and does not have a dedicated Asia vehicle.

The GP has substantially boosted its investment into Asian assets since setting up a China office (in Shanghai) in 2012 and an India office (in Mumbai) in 2010. It is focused above all on Greater China, India and Singapore. “With these local teams on the ground, we’ve been doing a lot more work here as a consequence,” de Vecchi told AsianInvestor

He declined to put a figure on the size of the increase in Asian assets, but pointed to several deals done in recent years.

They include two transactions in Singapore: the buyout of tuition chain The Learning Lab in September 2014, reportedly for $300 million, and an investment in Singaporean engineering solutions provider Quest Global this year, reportedly an 8% stake for $80 million.

And last year Advent reportedly paid $300 million, alongside Singapore state investor Temasek, for a 35% stake in Indian electrical engineering firm Crompton Greaves’s consumer products unit.

Asked how much of GPE VIII had been raised from Asian investors and from which types of client, de Vecchi declined to comment.

He said Advent had done well to reach its hard cap, given the increase in competition for limited partners’ capital and for transactions – as well as in LP scrutiny of GPs.

Certainly, PE firms – even well-established names, such as Apollo, Carlyle and RRJ – have admitted recently that fundraising in Asia has become more difficult of late.

And some LPs from the private wealth segment have become more cautious about allocating to larger funds, citing concerns that such GPs could be more focused on deploying assets than on achieving the returns on investments they had seen in the past.

Asked to comment on this – since $13 billion would be classed as a mega-fund in PE terms – de Vecchi said: “We’re not changing our strategy at all – the previous fund [which closed in 2012] was $10.8 billion. In terms of deals, we are size-agnostic; we cover the full spectrum, from a minimum of $75 million up to $1 billion in equity.”

Advent has done transactions in Asia ranging from $75 million up to several hundred million dollars, he added.

De Vecchi added that the firm retained its disciplined approach to investing even competitive markets.

In terms of sectors, the Shanghai office – which covers Greater China and Singapore – is focusing on education and healthcare. “Both have very strong growth fundamentals, and their outlook is very promising over the next few years,” said de Vecchi. Both sectors are benefiting from the rise in disposable income in Asia. 

Moreover, there is a lack of supply in healthcare services in the region, particularly in China, he noted. He added that education was interesting because of a growing focus on the quality of education in Asia, with families expected to invest a lot more in this sector over the next few years.

“The flipside is that competition is very intense in both sectors,” he said.

As for less interesting investment areas, there is a lot of overcapacity in the industrials sector now, noted de Vecchi, so Advent is less keen on such assets currently.

Asked about the firm's focus on value creation through operational improvements to portfolio companies, de Vecchi said the firm had always been focused on this. It has a team of five operating partners in Shanghai, who are all specialists in specific sectors. They form part of a global ‘portfolio support group’ of 70 external operating partners.

Advent has some 130 investment professionals globally.

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