This week we look at efforts to boost Malaysia’s private equity sector; the impact of India’s Budget on the private capital sector, and what top industry players have slated for 2025.
KWAP’s co-GP programme
Malaysian public service retirement fund KWAP has picked Kuala Lumpur-based Navis Capital; Bahrain-based Investcorp; Chicago-based Vistria Group; and Hong Kong’s Nexus Point Investments for its co-GP initiative, DealStreetAsia has learnt.
Investcorp said on Jan 22 that it has been “chosen by a large Asian institution to invest in Southeast Asia, worth over $100 million”. Navis and KWAP refrained from commenting.
Dana Pemacu is a 6 billion ringgit ($1.3 billion) co-GP programme that pairs international and domestic fund managers to jumpstart the local private capital ecosystem and to spur investments in key sectors including food security, education, the silver economy, healthcare, and energy transition.
But industry insiders are questioning the objective — is Malaysia short on capital or ideas? The former seems less of an issue with several regional funds actively looking at the region and writing $10-20 million cheques.
This initiative is seeded with 3 billion ringgit ($640 million) from KWAP; Dana Pemacu will allocate 2 billion ringgit each to three asset classes: Private equity, real estate, and infrastructure. Four selected GPs in each asset class will receive 500 million ringgit (~$120 million). They will be required to select a local GP as a partner.
Do the GPs need to raise additional capital? And, how many deals, and at what size, can be reasonably executed? Would it be enough to attract and sustain top-tier talent?
There are also questions on allocation of financial interests, in terms of distributing management fees and carried interest, and determining the GP stakes. Will it be evenly split between both the domestic and the foreign manager or could there be an imbalance where the latter commits more?
Success will depend on the alignment and chemistry between managers and firms with no prior collaborative history, industry experts caution. Different investment philosophies could be a hindrance.
Even in the interest of creating much-needed liquidity, would a purely primary mandate hold up? An industry insider reckons the inclusion of secondaries could facilitate exits; more than purchasing shares from founders but prioritising investments in businesses to recycling capital sustainably.
While there has been much growth in investments across stages in Southeast Asia over the past decade, how many of these VC-backed companies have matured to the point where they are now ready to attract PE investments?
Amid these concerns, Malaysian sovereign wealth fund Khazanah, which already invests globally, has decided to further diversify its portfolio amid lower 2024 earnings. Executives said in a media conference that higher interest rates, a stronger dollar, geopolitical tensions, and trade fragmentation meant 2025 was “not going to be easy”.
Malaysia would need to play smart, as it is caught between the US and China, which are at odds over tariffs, the Khazanah executive added.
India: Tax relief for PE-VC managers
Indian Budget 2025 has unveiled proposals to include all securities held by Category I & II AIFs (Alternative Investment Funds) as capital assets. This takes away the long-standing debate on whether income generated from these funds is treated as capital gains or business profits, which resulted in higher taxes.
All gains emanating from the sale of securities held by Category I & II AIFs will now be treated as ‘capital gains’ taxed at 12.5%, as against 30% for residents and up to 39% for non-residents in the ‘business income’ category.
These developments will make it easier to do business in India, said experts.
Category I AIFs focus on startup investments, while the second category includes real estate funds, PE funds, and funds for distressed assets.
Top PE developments
KKR is activating the fundraising of its Asia-focused infrastructure strategy soon, it said in an earnings call on Tuesday. Co-CEO Scott Nuttall said the next capital-raising process for its flagship corporate private equity series may begin with North America, followed by Asia and Europe.
Blackstone’s Jon Gray is expecting the group’s third corporate private equity fund for Asia to see “very significant closings in the coming months,” he said.
Keppel is nearing the first close of its third data centre fund that could gather up to $3 billion.
The battle for Japan’s Fujisoft continues as KKR raised its offer for the company by 4%, now outbidding rival Bain Capital, and extending the offer period to February 19.
Private equity major CVC Capital Partners has agreed to sell the online trading platform OANDA Global Corporation to FTMO, the Czech-headquartered trading education and training firm. CVC acquired OANDA via CVC Asia Fund IV in 2018.
The European investment giant is also set to exit its 25% stake in Indonesian toll road operator RKE International, valued at up to $300 million. Indonesia’s sovereign wealth fund INA and Japan’s Mitsui & Co are among the prospective buyers.
In another portfolio development, CVC and one of Australia’s superannuation funds Cbus is reportedly selling an A$1 billion portfolio of wind and solar projects in Australia.
The bid for Australian superannuation fund Insignia Financial is heating up with the entry of Brookfield Asset Management. The Toronto-based firm has offered to match bids of A$3 billion ($1.9 billion) from Bain and CC Capital Partners.
What to look out for
More global investors are building out their presence in Southeast Asia. London-based mid-market manager Inflexion Private Equity has hired Shane Gong from Evercore, where he was head of private capital for Asia Pacific. Gong is understood to be among Inflexion’s first set of hires in Singapore to lead capital-raising and client relations.
Swedish DFI Swedfund International is meeting partners and advisors with local representatives to better understand the needs and opportunities in the market, Marie Aglert, CIO and Head of the Investment Organisation said in a LinkedIn post.
This comes as questions swirl over the US’ international commitments following the executive order to freeze foreign assistance.
The US has had a significant presence in Asia Pacific since 2004, through the US DFC, with an annual budget of $50 million. It is still unclear how DFC and its investees will be impacted.
DFC operates through strategies spanning insurance and credit, direct and fund investments, and in sectors including healthcare, critical infrastructure, financial inclusion, and technology.
