MSPEA nears $1.5bn target

The Asia-focused private equity firm has raised a further $506m for its fourth vehicle and will likely close the fund by January 2014.

Morgan Stanley Private Equity Asia IV is nearing its $1.5 billion target, with pending commitments likely to bring the fund to a final closing by January 2014 “at the latest”, an LP source told Private Equity International.

“It is my understanding that a lot of their existing clients on prior funds on the sovereign wealth side are in the process and most likely will [commit], but they are just taking a lot longer to focus on making the commitment,” he said.

The news comes just after the firm closed a chunk of commitments from US investors in early October, raising over $506 million, according to two disclosures from the US Securities and Exchange Commission. 

A spokeswoman from MSPEA declined to comment on the fundraising.

MSPEA made a first close on $750 million in November last year, with LPs so far including the Oregon Investment Council, Pennsylvania Public School Employees’ Retirement System, the University of Michigan and Portfolio Advisers, according to PEI's Research & Analytics division. 

The fund, although pan-Asian, has a heavy emphasis on the China market, with a tranche set aside to invest at least one deal per year in Korea, according to PEI’s source. 

“[The attraction] for us was their China experience and expertise and the individuals that are involved on the China team,” he explained.

People understand who HSBC or Morgan Stanley are and take a meeting with you, particularly in China. Morgan Stanley’s private equity team in Asia has done a good job in continuing to make a step towards having more autonomy from being a captive.

LP source

MSPEA has completed two take-privates of Chinese companies this year – privatising Yongye International from the NASDAQ in September in a $339 million deal and Feihe International from the New York Stock Exchange in March in a $147 million deal. 

The firm has also delivered success in China, having sold a 6.8 percent stake in Sihuan Pharmaceutical Holdings in September alongside management, gaining a 5x return for investors, a source close to the matter told PEI earlier. 

“Primarily for us the attractiveness was the China track record [but] also the ability and history of doing control buyouts in Korea. From our perspective we're still not sold on a full commitment to a Korean-focused fund so [it is good] when we can find good teams within pan-Asia teams that can execute good Korea deals on a consistent basis.”

However, MSPEA’s LP explained that the modest fund size compared to other firms raising Asia funds, for example Kohlberg Kravis Roberts with its $6 billion Asia Fund II, as well as operating under a name brand, was appealing. 

“[Some firms] don’t appreciate what a name brand can do for you as far as deal sourcing,” he explained. “People understand who HSBC or Morgan Stanley are and take a meeting with you, particularly in China. I think Morgan Stanley’s private equity team in Asia has done a good job in continuing to make a step towards having more autonomy from being a captive.”