CARLYLE Group has delayed closing its new pan-Asian buyout fund as demand for a Japan-focused vehicle has syphoned off investor interest, according to sources familiar with the matter.
The Washington-based firm has asked for an extension in the closing of its sixth regional buyout fund, the sources said, asking not to be identified because the information is private. Since the launch more than two years ago, it has received US$3 billion in commitments, well below its original US$8.5 billion target, the sources said. A typical fundraising takes about 18 months or less.
Fundraising is taking longer than normal in part due to a heightened concern among global investors about overpaying for assets and exit opportunities, resulting in more rigorous due diligence.
The firm’s US$2.9 billion Japan fund, which closed in May and is almost 70 per cent bigger than its previous such fund, has also cannibalised the pan-Asia raising as international investors have chosen to prioritise that nation, the sources said. Carlyle has raised almost US$6 billion in Asia since last year, including US$950 million for its second growth fund.
A Hong Kong-based spokesperson for Carlyle declined to comment.
Investors in the new Asia fund will be promised access to the Japan deals flow, including the recently announced US$610 million acquisition of KFC Holdings Japan, the sources said.
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Rising geopolitical tensions, worsening exits, capital distribution and significant losses from China investments in recent years have prompted some investors to reduce allocations to pan-Asia funds and focus more on their home markets.
Still, some allocators commit to Asia because of decent returns posted by some managers with team stability and exposure to Japan and other markets such as India and South Korea, according to one of Carlyle’s biggest investors, who asked not to be identified.
The US firm told investors the exposure to China in its sixth Asia fund will be cut by as much as half to 20 per cent over the next fund cycle, sources familiar have said. Like its rivals including KKR and Bain Capital, Carlyle is focusing on buyout opportunities in markets including India and South Korea.
Private equity exits in Asia-Pacific fell 26 per cent to US$101 billion in 2023 compared with the previous five-year average, according to Bain. Fund-raising in the region dropped to the lowest level in a decade, according to its 2024 industry report.
PAG, Asia’s biggest manager of alternative assets, closed its latest buyout fund at about US$4 billion in June, reaching less than half of its original target. TPG’s eighth Asia fund has raised US$5.3 billion, and plans to slash its China allocation by more than half from prior regional funds, sources familiar said in March.
Carlyle’s disposal of its entire stake in McDonald’s China operation, with a 6.7 times return, was one of its best exits from China and helped mitigate the concerns of distribution. Some investors still want exposure to the world’s second-biggest economy as valuations look attractive, the sources said.
Rivals who have shied away from China have seen better fundraising results. CVC Capital Partners in February raised US$6.8 billion for its sixth Asia fund, which was 50 per cent bigger than its 2020 pool. The London-based firm reduced its China exposure years ago and had been focusing South-east Asia and other markets in the region. BLOOMBERG
