Asia growth at forefront of PE aspirations

Amid testing market conditions, Carlyle Asia Partners has continued to commit capital to China. We profile its regional managing director and co-head, XD Yang.
Asia growth at forefront of PE aspirations

The past few years have been tough for Asian private equity players, particularly when it comes to realising investments given the region’s stagnant IPO markets.

China is a case in point. One private equity firm to see both sides of the coin is Carlyle Asia Partners. It has reportedly invested some $4 billion in more than 60 deals in China – making the country its chief investment target in the region.

This January it exited its $800 million investment from 2005-07 in the mainland’s third-largest insurer, China Pacific Insurance Group, netting an estimated $4 billion profit.

It has endured difficulties too, with its bid for an 85% stake in Xugong Construction Equipment lapsing, apparently due to objections on nationalistic grounds. That led it to focus on minority investments in private companies.

But what Carlyle has continued to focus on is localisation, installing native talent in each Asian market it has a presence in.

It continues to bet on Asian growth – based on a swelling middle class, rising disposable incomes, urbanisation and changing demographics – and spies opportunities in consolidation and corporate realisation.

One industry trend has been Asian institutions seeking to diversify out of their home markets to secure long-term returns, often across border. This is something Carlyle is striving to tap, bringing its global network to help Asian companies expand.

Driving Carlyle Asia Partner’s regional strategy over the past decade has been XD Yang, managing director and co-head.

We featured Yang in our list of the 25 most influential people in Asian private equity, which appeared in the September issue of AsianInvestor magazine. These are the players we believe are shaping the industry’s future.

We have been revealing some of our choices for online readers. These, we hope, will showcase some of the key industry trends to be aware of.

Recently we profiled Tang Kok-Yew of Affinity Equity Partners. Prior to that we profiled Joseph Bae of KKR Asia, and Warren Allderige of Harbor Pacific Group.

XD Yang, managing director, co-head,
Carlyle Asia Partners

Carlyle made its first acquisitions in the region in the depressed conditions following the Asian financial crisis. After the US market took a similar turn at the start of this century, Asia was seen as the region that would prevail, driving growth in the West. XD Yang joined the firm’s Hong Kong operations in 2001, putting it on the course of regional expansion as it pursued deals in a growing Asian market.

Yang led Carlyle’s $800 million investment in China Pacific Insurance Group between 2005-07. It exited the company this January, netting an estimated $4 billion profit – one of the firm’s most profitable investments.

Over the past 12 years, Carlyle has made its mark in countries including Australia, India and Taiwan, investing across a variety of sectors. It has made $6.4 billion in investments and co-investments in more than 30 companies in the region as of June 30.

Carlyle Asia Partners IV is in the market aiming to raise $3.5 billion by year-end. Predecessor fund III, which closed at $2.5 billion in 2010, had a gross internal rate of return of 11% and net IRR of 5% as of June 30, by its second quarter earnings report.

Yang notes that Asia is an attractive market for Carlyle, given the increasing rate of urbanisation and a growing middle class. “In many industries, we will also see consolidation and corporate rationalisation take place,” he says. “We expect to see more interesting investment opportunities.” Carlyle is seeking to help Asian companies expand globally.

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