Western promises

Asian sovereign wealth funds continue to find merit in striking partnerships with and backing large, brand-name fund managers, with TPG Capital the latest to sell a minority stake in its management company.

The private equity firm reportedly sold a 4.5 percent stake to the Government of Singapore Investment Corporation (GIC) and the Kuwait Investment Authority (KIA) for “several hundred million dollars”, according to a Wall Street Journal report.

The transaction puts in on par with The Blackstone Group, Apax Partners, Apollo Global Management, The Carlyle Group and Fortress Investment Group, all of which have in recent years sold a stake in their firms to sovereign wealth funds as a means of locking in franchise value and raising fresh capital. In some cases, those sales have been seen as precursors to public listings of management companies, a means for the fund manager to test investor appetite and value its business.

TPG co-founder David Bonderman, however, reportedly allayed speculation about a future IPO, telling LPs in letter that the firm had “chosen a private transaction as a path to provide capital to our firm”, as opposed to raising capital via publicly listing.

For TPG-watchers, the recent stake sale should not have been a surprise: In 2009 the firm abandoned plans to sell a single digit stake in its management company because of disagreements over valuation. It had reportedly been in talks with KIA, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) at the time. TPG's venture arm, TPG Ventures, also sold a $60 million equity stake in 2001 to CalPERS, CalSTRS and Oregon's Public Employees Retirement Fund.

Likewise, GIC is a repeat buyer, having previously purchased a minority stake in Apax. Other sovereign funds in the region to have struck similar deals with GPs include the China Investment Corp. and Australia’s Future Fund.