Bain Capital to launch US$2.5b fund for Asia

PUBLISHED : Wednesday, 27 June, 2012, 12:00am
UPDATED : Wednesday, 27 June, 2012, 12:00am
 

Bain Capital, whose investment portfolio on the mainland includes Gome Electrical Appliances, the mainland's No2 home appliance retailer, is close to completing a fund raising of about US$2.5 billion for a new Asia-dedicated private-equity investment vehicle.

The successful fund raising comes despite weak market sentiment worldwide that has turned many investors cautious about making new investments.

People familiar with the situation told the South China Morning Post that Bain Capital, which was co-founded in the early 1980s by current US presidential candidate Mitt Romney, would name the fund Bain Capital Asia II. It will be the firm's second private-equity fund focused entirely on investments in Asia, a region that is growing faster than most of the rest of the world.

In 2008, Bain Capital raised US$1 billion for its first Asia-dedicated fund.

Industry insiders say at least 10 investment firms - including the Washington-based Carlyle Group and Wall Street bank Morgan Stanley - are now trying to raise money for their new Asia-focused funds. Many of them aim to raise between US$1 billion and US$2 billion each.

But weak sentiment amid the debt crisis in Europe and a slow economic recovery in the United States have posed difficulties for some private equity firms in securing enough capital for their new funds this year.

'It is pretty impressive [for Bain Capital] to raise so much money when the fund-raising environment is so bad these days,' said one of the people who asked not to be named because the fund-raising process was private.

Bain Capital declined to comment. The Boston-headquartered private equity firm is an investor in 17 companies in Asia. Besides Hong Kong-listed Gome, in which it holds about a 10 per cent stake, Bain Capital has a interest in Bellsystem24, a Japanese telemarketing service provider.

Bain Capital accelerated its investments, particularly on the mainland, after hiring Jonathan Zhu Jia in 2006. Zhu is former chief executive of Morgan Stanley in China and is also the deal maker behind Bain Capital's high-profile 2009 investment in Gome. That investment came after Gome's founder Wong Kwong-yu, also known as Huang Guangyu, was arrested on the mainland. Wong was later jailed for 14 years for bribery and insider trading.

Two private-equity industry executives told the Post that there were concerns about Bain Capital's new fund for Asia because shares in Gome had lost about 45 per cent of their value in Hong Kong since the start of the year, partly because of the company's weak business performance.

Some investors doubt the extent of influence Bain Capital actually has on Gome's management, and therefore how the US investor can ensure its investment will not be a loss maker. 'The Gome deal is certainly not something that Bain Capital wants to talk about too much when trying to convince old and new LPs [limited partners] to put more money in the new fund,' one of the executives said.

In the private-equity business, those who manage funds are known as general partners (GPs) and the institutional investors in the funds are known as LPs. The LPs give their money to GPs to manage in the hope they can get higher returns - sometimes three to four times the initial amount - within a few years, much higher than from investments in traditional asset classes.

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