Carlyle raises $1bn for Asian growth capital

The global private equity firm has closed Asia Growth Partners IV after 14 months in the market.

The Carlyle Group has closed Carlyle Asia Growth Partners IV (CAGP IV) on $1.04 billion. Like its predecessor, which closed on $668 million in 2006, CAGP IV is a sector-agnostic fund that will invest in private companies with high growth potential.

The new fund will acquire stakes of between 20 percent and 40 percent in companies. Its sweet spot in terms of investment size per deal is between $20 million and $40 million per equity cheque though it will consider opportunities in the range of $15 million to $75 million, Wayne Tsou, managing director and head of Carlyle Asia Growth Partners, said in an interview.

Almost 40 percent of the fund’s limited partners are new investors. A noticeable change in the limited partner mix was a significant increase in commitments from government pension funds and large financial services groups, Tsou said. The increase in investments from pension funds is a good sign, he said, because the large pension funds have traditionally not paid much attention to growth capital funds and have preferred to invest in buyout funds. In addition, pension funds have normally “been risk averse and they have believed that India and China carried a very high risk profile, but they see that we can provide higher risk adjusted returns”, he said.

CAGP IV also saw a 40 percent increase in commitments from Asian investors as compared to the group's predecessor fund, Tsou said, adding that it was encouraging sign.

The fundraise is a reflection of improving investor sentiment towards India and China as the two economies begin to stabilise and show signs of emerging from the slowdown, the firm said.

“The Chinese domestic consumption story is developing well,” Tsou said. The country’s strong economic performance, the successful implementation of its stimulus plan and incentives for small and medium enterprises are attracting international investors, he added.

The firm also believes that India is well-positioned for further growth. Its emerging middle class is fuelling strong domestic consumption, while outsourcing and re-engineering of various products and services to India continues to grow.

“India’s growth story is sustained by its vibrant capital markets, a resilient banking system and a pro-business stable government,” Shankar Narayanan, a Carlyle managing director responsible for CAGP’s investments in India, said in a statement.

Carlyle invested $20 million for an undisclosed stake in Chinese women’s fashion house Ellassay in March, its first investment from the fund.

Carlyle Asia Growth Capital group’s fund III has made 22 investments in sectors such as energy, consumer, technology, business services, education, industrial, healthcare, real estate and media. Eighty percent of CAGP III’s investments have been made in China and India. That fund is almost fully invested, with the little remaining capital to be used only for follow-on investments, Tsou said.

The Asian growth capital group’s other funds include Carlyle Asia Venture Partners I, which closed on $159 million in 2000, and Carlyle Asia Venture Partners II, which closed on $164 million in 2002.

The group has offices in Beijing, Hong Kong, Mumbai, Shanghai, Seoul and Tokyo.

Carlyle’s other Asian investment platforms include Carlyle Asia Buyout, Carlyle Japan Partners and Carlyle Asia Real Estate Partners.

Carlyle is currently raising its third Asia-focused buyout fund, which initially went to market with a reported target of $4 billion.