Asian PE players target growth via diversification

One of the recent trends to have emerged in Asia’s still nascent private equity industry is a diversification drive from some of the larger industry players.

This is coming out of the US, where the likes of Blackstone, KKR and TPG have all been branching out from pure private equity to multiply their revenue streams. It appears an effort to transform themselves into the BlackRock of private equity.

Blackstone’s earnings, for instance, are now being powered by its real estate business, while it also has a successful hedge fund of funds business.

The thinking is that to grow they need to diversify, and in so doing become less vulnerable during an industry downturn. This has, perhaps, been driven by the difficult fundraising environment post the global financial crisis of 2008-09.

In AsianInvestor’s September magazine edition, an electronic version of which is available on www.asianinvestor.net, we published what we believe to be a list of the 25 most influential people in Asia’s private equity industry.

While this list is subjective, it captures some of the key trends of this region’s maturing PE industry.

Each week, we will publish snippets from the list for our online readers. Last week we profiled Warren Allderige, managing director and CEO of Pacific Harbor Group.

This week we profile Joseph Bae of KKR Asia, a firm that is seeking to branch out into new services such as alternative credit.

Joseph Bae, managing partner, KKR Asia
When KKR arrived in Asia in 2005, marked by the opening of offices in Hong Kong and Tokyo, it was met with curious fascination. While several of its global private equity peers had established footholds in the region, KKR was a newcomer that had not done a single deal in Asia since its founding in 1976.

Joseph Bae went on to oversee the firm’s ascension to heavyweight dealmaker status in the Asia. It has invested more than $5.5 billion in PE deals in 30 companies across the region over the past eight years.

A Korean-American, Bae has led the firm’s regional expansion to seven offices, appointing native citizens as country heads. The strategy helped KKR to gain insights quickly and strike business partnerships in each country.

Bae also played a central role in its latest feat: raising $6 billion for KKR Asian Fund II, which stands as the biggest pan-Asia PE vehicle to date. Its predecessor, which closed in 2008 at $908 million, had a net IRR of 13.5% as at end-December 2012, according to US fund Calpers.

Having completed fundraising for it latest Asian fund, the next steps will be to “step up our presence in core and emerging markets, going beyond traditional PE by branching out into services, such as alternative credit”, says Bae. Diversifying will give KKR flexibility in generating deals with corporations and family businesses. Bae’s legacy may extend beyond Asia, as he is regarded as a potential successor to KKR founding partners Henry Kravis and George Roberts.