Warburg Pincus doubles China target as it eyes South-East Asia

The buyout giant's China Fund I had the flexibility to invest in South-East Asia and the latest vehicle is understood to have an expanded mandate for the region.

Warburg Pincus has more than doubled the target for its latest Asia-focused private equity fund as it joins a growing number of players bullish on South-East Asia.

The US firm is seeking $4.25 billion for Warburg Pincus China-Southeast Asia II, according to a Securities and Exchange Commission filing. It collected $2 billion for Warburg Pincus China Fund in December 2016, according to PEI data.

Fund I had the flexibility to invest in South-East Asia and the latest vehicle is understood to have an expanded mandate for the region. Warburg has completed 44 investments in China, five in Vietnam, three in Singapore and two in Indonesia through its global and dedicated funds, according to its website.

Warburg Pincus declined to comment.

Warburg’s China funds invest alongside its flagship vehicles, meaning it could have as much as $8 billion of firepower for the region.

South-East Asia is an area of growing interest for private equity. The region has been voted the most-attractive emerging market by limited partners for three of the past five years, according to EMPEA data. More than two-thirds of Asia-Pacific corporate investors have also identified it as their top priority for overseas dealmaking, per an April Baker McKenzie report.

CVC Capital Partners is expected to allocate half its fifth Asia fund to South-East Asia, having struck its first deals in Vietnam and Cambodia in 2017.

Morgan Stanley collected $440 million against a $300 million target for its debut private equity fund focused on Thailand in October. The vehicle serves as a strategic platform for Thai portfolio companies’ expansion into Cambodia, Laos, Myanmar and Vietnam.

South-East Asian spending fell to $8.9 billion across 69 deals last year, compared with $17.5 billion over 90 transactions in 2017, according to EY’s Private equity briefing: Southeast Asia published in May. The opportunity set is likely to increase as 85 percent of South-East Asian corporates plan to divest parts of their business in the next two years, compared with just 26 percent in 2017.