Hong Kong-based Affinity Equity Partners has closed its fourth fund on $3.8 billion, exceeding the $3.5 billion harcap, a source close to an LP investor in the fund told Private Equity International.
Affinity Asia Pacific Fund IV was launched in September 2012 and held a first close on $1.5 billion in March.
The fund would have closed in 12 months, but the firm had negotiated with LPs in order to exceed the hardcap by about 10 percent, PEI’s source said.
Nonetheless, the fund closed faster than the average closing time for an Asia fund targeting $1 billion or more, which in 2013 was 16.6 months, according to PEI's Research & Analytics division.
Affinity’s previous fund, a $2.8 billion vehicle with a 2007 vintage, has been fully invested since late October, when Affinity closed a $123 million investment in Chinese milk producer Beijing Sunlon, PEI reported earlier.
The firm used placement agent MVision Private Equity Advisers. Both Affinity and MVision declined to comment on fundraising.
About 40 percent of LPs are new and 60 percent are re-ups, and the geographic makeup is split fairly evenly between North America, Europe, Asia and the Middle East, PEI's source said. “The geographic mix is ideal — the fund is not dependent on any one region.”
Among the LPs who re-upped in the Fund IV are the Maine Public Employees Retirement System, the Montana Board of Investments and Washington State Investment Board, according to PEI’s Research & Analytics division.
There were several reasons for the relatively fast fundraise, the source said. Affinity has a long track record in Asia, its Fund III returns were well-received by LPs and its pan-Asian buyout fund has stuck to a consistent investment philosophy.
“LPs want diversified funds and have a growing preference for controlling stake investments,” said the source. “They like control shops because that allows for the trade sale option and easier operational change. The minority stake deal in China and India is falling out of favor.”
Another factor is that investor interest in China is waning and Affinity has only 10 percent of assets under management based on the mainland, the source added.
Affinity has also provided co-investment opportunities in every fund it raised, said the source.
“Today co-investment is a holy mantra in the LP world and a lot of them have beefed up internal staff in order to do it.”
Hong Kong-based Affinity Equity Partners is a 2004 spinout from UBS Capital Asia Pacific, the private equity arm of UBS. Led by co-founder KY Tang, the firm invests in consumer-related goods and services, value-added manufacturing, healthcare, financial services and business services across Asia. It has about $4 billion in assets under management.