While there has been a noticeable trend among large private equity firms to branch out as a means to diversify their revenue streams, that is not the case across the board.
The past few years have been a difficult fundraising environment for Asian private equity, even as investor interest has risen, particularly among regional institutions looking to diversify out of home markets and secure long-term returns.
But this year is a potential turning point for the industry. Global sentiment for emerging markets is souring, which is hurting investments in public securities, and generating a new need for capital among regional entrepreneurs.
While large PE players have been busy diversifying into areas such as credit funds, the prospects are also seen as bright for dedicated funds with a focus on private equity styles (buyouts, for example) or a country or region.
One such player is Affinity Equity Partners, which started life in January 1998 as the private equity arm of Swiss investment bank UBS. Eventually it was spun out into its current guise in 2004 by chairman and managing partner Tang Kok-Yew.
We featured Tang 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 are revealing some of our choices for our online readers. These, we hope, will showcase some of the key industry trends to be aware of.
Here we showcase Tang as an example of a buyout specialist who has kept to the same strategy, a value investor focused on long-term fundamentals. The firm tends to hold its investments for five years or more before exiting via strategic trade sales.
Tang Kok-Yew, chairman, managing partner, Affinity Equity Partners
Born in Malaysia, KY Tang became an entrepreneur by default. He had worked as a banker and manager all his life, including as chairman of UBS Capital, the private equity arm the Swiss bank set up in 1998 after the Asian financial crisis. Following the dotcom bust, Tang span the unit out to create Affinity Equity Partners in 2004. “Looking back it was the best thing that happened to me,” he says.
Affinity has five partners, four of whom were with it at spin-off. It has fully invested three funds and exited two. Today it is raising its fourth fund, targeting $3.5 billion. Overall Tang says Affinity will be managing over $6 billion before the year is out. Its strategy is value investing based on long-term fundamentals. It takes controlling stakes, frequently 100%, and adopts an active approach. “We tend to buy good companies with good management and make them better,” says Tang.
It holds investments for five to six years and primarily exits via trade sale to strategic buyers. It has just made its first investment in fund IV, paying $238 million to SK Telecom Group for a controlling 53% stake in Loen Entertainment, which Tang describes as the iTunes of Korea. In fact, Affinity has become closely associated with Korea, where it has sourced a number of deals. It employs over 50 people across six Asia-Pacific offices. Its favoured sectors are food and beverage, consumer goods, financial services and marketing-leading industrial companies.