CVC Capital Partners has closed its sixth pan-Asian fund at USD 6.8bn – exceeding the USD 6bn target – on the back of an investment story rooted in Southeast Asia for the past two vintages and with limited historical reliance on China.

Southeast Asia accounted for 40%-50% of the Fund IV corpus and about the same in Fund V, according to a source close to the situation. Japan followed with a percentage share in the mid-20s. China and what is known as the regional team each contributed about 10%. The regional team focuses on Greater China and ex-domestic China deals, as well as anything with an international or cross-border element.

“North American investors are not enjoying over-exposure to China. CVC doesn’t have that, and it’s never had that – China was in the low teens or high single digits in each of the last two funds. That is unlikely to change,” the source added. CVC declined to comment.

Geographic exposure is a visible distinction between large-cap buyout managers that have closed their latest funds and those that are still chasing commitments amid challenging conditions globally.

Around USD 58.7bn was committed to managers in the region last year, excluding renminbi-denominated vehicles, according to AVCJ Research. This compares to USD 112.8bn in 2022. The portion of capital going to pan-regional funds fell from 41% to 34%. Bain Capital was the only pan-regional player to raise more than USD 2bn, securing USD 7.1bn for its fifth fund.

Japan, China, and India are Bain’s big three markets, but China is currently less active than the other two, Jonathan Zhu, co-head of Asian private equity at the firm, recently told AVCJ. Similarly, TPG reached a first close of USD 3.4bn on its latest Asian fund in November 2022, having emphasised the significance of Australia and Southeast Asia in its portfolio.

Other groups better known for their China investments – including PAG and The Carlyle Group – have reduced the targets and extended the fundraising periods for their latest vehicles.

CVC launched Fund VI in the first quarter of 2022 and reached a first close of around USD 3.5bn by the end of that year. For the first time, Asian LPs are responsible for the largest percentage share of commitments, closely followed by North America, the source added. In Fund V, which closed on USD 4.5bn in 2020, both were on about 30%, with North America enjoying a slight lead.

AVCJ Research broke down CVC’s investments since 2004 into four five-year periods. A string of large leveraged buyouts in Australia and Japan led to these markets accounting for three-quarters of volume in 2004-2008. Some of these investments suffered during the global financial crisis and the firm ended up exiting Australia (it returned in 2021) and scaling back in Japan.

CVC rebuilt its Asia franchise around Southeast Asia. A landmark investment in Indonesia-based Matahari Department Store in 2010 created a template for the partnership approach now pursued in this market, whereby the firm enters minority-joint control deals with founders and family groups. In 2009-2013 and 2014-2018, Southeast Asia was CVC’s core geography.

In the last five years, Southeast Asia has remained significant, but it has been counterbalanced by a resurgence of Japan and the establishment of a team in India. Japan’s one-third share is underpinned by acquisitions of Sogo Medical and Trygroup, each worth around USD 1bn. In India, the firm has bought agrochemicals player Sajjan India and cricket franchise Gujarat Titans.

The distribution of CVC’s 75 investment professionals reflects its geographic priorities. More than 20 sit in Singapore – a hub for coverage of Southeast Asia – including Sigit Prasetya, the firm’s regional head. Hong Kong isn’t far behind, partly because the regional team strategy is run out of this office. Meanwhile, the Tokyo and Mumbai teams are about twice the size of the Shanghai operation.

LPs that have disclosed their participation in CVC Capital Partners Asia VI include California State Teachers’ Retirement System (CalSTRS), Canada Pension Plan Investment Board (CPPIB), Oregon State Treasury (OST), and Partners Group. The CalSTRS, CPPIB, and OST contributions were USD 125m, USD 400m, and USD 150m, respectively.

According to the California Public Employees’ Retirement System (CalPERS), CVC’s fifth Asia fund had generated a 1.3x multiple and a 23.2% IRR as of June 2023. CalSTRS gave the IRRs for Funds III and IV as 12.78% and 15.35% as of the same date.

Carlyle’s fourth Asia fund, which is of a similar vintage to CVC’s fourth vehicle, was on a net multiple of 2.1x and a net IRR of 13% as of December 2023. This compares to 1.2x and 3.4% for KKR’s second Asian fund and 1.7% and 11% for TPG’s sixth regional fund.

CVC’s fifth fund launched the same year as KKR’s third pan-Asian offering and a year after Bain’s fourth fund. KKR’s net multiple and net IRR were 2x and 24.2% as of December 2023. Bain had delivered 1.22x and 18.2% as of June 2023, according to Border to Coast Pensions Partnership.