| HONG KONG
HONG KONG Oct 4 U.S. private equity firm KKR &
Co LP has told investors it will refrain from launching
a new fund targeting small- and medium-sized companies in China
and will instead focus on larger, more profitable buyouts,
people familiar with the plans told Reuters.
New York-based KKR's move underscores a shift underway in
Asia, where global private equity firms are shying away from
bite-sized investments to the tune of $50 million to $100
It comes at a time when growth is slowing in China and
questions are increasing over the health of its corporate
landscape, often indebted and lacking transparency.
Carlyle Group LP, another large private equity firm
with a big presence in Asia, said last week it expects an
increase in deals where private equity investors buy control of
companies instead of minority stakes, particularly in China
where slowing economic growth is likely to convince more owners
KKR's $1 billion China Growth Fund, launched in 2010, has
returned 14.3 percent since its inception till end-June. It
outperformed the benchmark MSCI China index,
which lost about 10 percent over the same period.
KKR's larger, regional $6 billion Asian Fund II, which
focuses on big ticket transactions, has returned 36.2 percent
since its launch in 2013.
The China Growth Fund has deployed about three-quarters of
its capital, KKR filings show, reaching the stage when private
equity companies would typically go back to investors to launch
a new fund.
But KKR told some of its limited partners (LPs) it wouldn't
raise a successor fund, said the sources. The message was
delivered last year at the time of KKR's regional investor
conference in Asia, they said, but the details were not made
KKR declined to comment. The sources couldn't be named
because talks were private.
The China Growth Fund had taken stakes in Chinese education
provider Tarena International, China Cord Blood Corp
, chicken meat company Fujian Sunner Development Co
and appliance maker Qingdao Haier, with
the Asian Fund II also investing in Haier and Sunner.
The China Growth Fund has also invested in large-scale dairy
farms in China as well as in apparel retailer Novo Holdco, which
operates LeSportsac stores in China, fish feed company Yuehai
Feed Group and Uxin, China's largest online used car auction
KKR is expected to formally launch its third pan-Asia fund
by year end, targeting a record $7 billion.
The firm recently lost two of its top China dealmakers,
David Liu and Julian Wolhardt, who decided to form their own
rival investment firm, prompting a restructuring of its Asia
(Reporting by Elzio Barreto and Denny Thomas; Editing by Lisa
Jucca and Muralikumar Anantharaman)