Capital raises US$3b to target BRICS markets
The Capital Group, one of the world's largest asset managers, has raised US$3 billion for a new private equity fund dedicated to investing in emerging markets, including China.
Capital International Private Equity Fund VI was the sixth such fund Capital had launched in a decade to focus on emerging markets, which included about 20 countries, said James McGuigan, a managing partner with the firm.
In addition to China, which had been a hot destination for global dealmakers in the past decade, San Francisco-based McGuigan said in a telephone interview yesterday that the fund would also focus on the other BRICS countries.
He was referring to the group of leading emerging economies that consists of Brazil, Russia, India, China and South Africa.
'The problem in emerging markets for the private equity business is not macroeconomic issues,' McGuigan said.
He said those economies had become more mature since the days of the Asian, Russian and Latin American financial crises.
'The problem today is there is too much money and too many people' doing private equity deals, McGuigan said.
McGuigan, a long-time dealmaker in Asia, said the new Capital fund would focus on investments of between US$100 million and US$300 million per deal.
He estimated that it could take about four years to spend most of the fund's money on investments in between 15 and 20 companies.
Global private equity firms have found some difficulty securing enough capital for their new funds this year because of weak market sentiment amid the worsening debt crisis in Europe and the slow economic recovery in the United States.
People in the industry say at least 12 investment firms, including the Carlyle Group, buyout fund giant TPG Capital and Bain Capital, are in the market to raise money for new Asia-focused funds. Many of them aim to raise between US$1 billion and US$2 billion.
Besides problems raising funds, valuation is another worry for dealmakers in emerging markets. The problem is acute in China, where private equity executives complain that the good old days of cheap, high-quality deals are gone.
McGuigan agreed that this was true, but said his fund would have options other than China.
'If China is too expensive, that's not the end of the world, because we can still try Russia, Latin America and other emerging markets,' he said.
McGuigan said the fund would focus on consumer-related investment themes, which he believed would have huge growth potential in emerging markets where people were rapidly getting richer.
'People in those countries want better cars, education, health care and so on. They want to have a better living standard,' he said.
Another focus of the fund would be commodity-related businesses, McGuigan said.