PRIVATE EQUITY | Cesar Tordesillas, China

Asian private equity fundraising down in first half

Private-equity fundraising and transactions decreased in almost every country in Asia during the first half of 2012, including China.

While the biggest funds like Kohlberg Kravis Roberts & Co. and TPG Capital continued to raise ever-bigger Asia-focused funds, fundraising in the region reached $26.2 billion in the first half of this year, a 23.4% drop from the same period a year ago and the lowest level since 2009. Less than 700 funds were closed in the period.

This was attributed to weak markets make IPO exits tough while continued high valuations put off investors, according to data from industry publication Asian Venture Capital Journal.

Fundraising fell by 9% in China in the first half of this year compared to the same period in 2011 to $17.7 billion, accounting for 79% of funds raised in Asia-Pacific. Of that, local currency yuan funds accounted for 82% of the amount raised, up from 54% the same period the year before. According to AVCJ, 18 of the 30 largest funds closed in the first half of this year were yuan funds, many of which had local-government backing.

For example, Nanjing Jianning Zijin Investment Fund Management, backed by the city of Nanjing’s government, raised $3.2 billion this year.

Australia and Singapore were the only jurisdictions in Asia where fundraising rose, more than tripling the amount from the same period a year earlier. Private-equity funds in Australia raised $255 million in the first half of 2012, up from $78 million a year earlier, reflecting strong interest in the country where some distressed assets have been put on the block.

The huge increase in fundraising in Singapore also signals growing interest in Southeast Asia, which has seen an explosion in deal activity this year.

“Southeast Asia has lower markets liquidity than China or Korea, which is why we look at buyouts in Southeast Asia (rather than taking minority stakes),” said George Raffini, managing partner of Headland Capital Partners.

China continued to dominate fundraising, however, with local currency funds taking up a larger share of the total.

Private equity partners say that tough IPO markets have added to the difficulty in fundraising.

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