PAG Said Gearing Up for New $6B Asia Buyout Fund

Hong Kong-based alternative investment firm PAG is planning a new Asia buyout fund with a target of $6 billion, according to a Reuters account citing people with knowledge of the plan. PAG has reportedly started canvassing investors about the vehicle in recent weeks but has not yet formalised the fundraising schedule or fund size.

The reported fund would mark PAG’s third and largest pan-Asia buyout vehicle, as other private equity giants including Blackstone, Carlyle and KKR raise billions for their own regional funds. A PAG spokesperson declined to comment on the report when contacted by Mingtiandi.

News of the new fund comes soon after US private equity giant Blackstone said late last month that it had purchased a minority stake in PAG through its Strategic Capital Holdings Fund for an undisclosed sum. Blackstone indicated it intended to be a passive partner in the business.

New Fund Could Nearly Double Size of PAG Asia II

The potential fundraising plan was first reported by industry publication AVCJ, which said PAG was aiming to raise $4.5 billion. PAG said in January 2016 it had raised $3.6 billion for its second Asian buyout fund, PAG Asia II LP, following the closing in 2012 of its first pan-regional private equity fund at $2.5 billion.

The latest move under PAG’s private equity strategy comes after the firm last year closed on a $1.9 billion Japan-focused real estate fund, has invested over $25 billion into more than 6,700 properties across Asia, spanning value-add, core-plus and opportunistic deals. The firm founded in 2002 also invests in private equity and absolute return strategies in the region and manages more than $20 billion in capital.

Last September, the firm headed by Chinese dealmaker Weijian Shan announced the final closing of its Secured Capital Real Estate Partners VI (SCREP VI) fund with $1.9 billion of commitments, topping its initial $1.5 billion target. The vehicle focusses on distressed debt and property investments in Japan, along with other opportunistic real estate assets in markets including China and South Korea.

PAG’s real estate strategy joined with Goldman Sachs to make a strategic investment in Chinese flexible office brand Atlas this past January. The company bought a controlling stake in China’s largest dating platform, Zhenai, Inc, and is also a major investor in global real estate brokerage Cushman & Wakefield.

PAG is also a backer of the controversial Hong Kong-listed Spring REIT, and agreed to a deal with HNA Group that would provide the troubled Chinese conglomerate HNA Group with a loan of up to HK$3 billion ($383 million) linked to HNA’s acquisition of sites in the Kai Tak area of Hong Kong.

Global PE Giants Bet on Asia

PAG’s latest reported fundraising effort would add to an expanding pool of private equity capital in the region. New York-based leverage buyout firm KKR closed on its third pan-Asian fund last June after raising $9.3 billion, marking the largest-ever private equity fund dedicated to investment in Asia Pacific.

Although the company did not specify the asset classes that would be targetted by the fund, KKR has been a significant investor in Asian properties from shopping malls in China to residential projects in India.

Last October, US-based Carlyle Group announced in the same month it had reached the first close of its fifth Asia buyout fund at over $4.5 billion. The vehicle has a target of $5 billion as Carlyle has been reshaping its Asia leadership team this year.