Private equity firm TPG has acquired a minority stake in Hong Kong-based secondaries PE firm NewQuest Capital Partners, entering a fast-growing segment with potential to generate higher returns.
The deal will give TPG exposure to “Asia’s rapidly growing secondary market,” TPG co-chief executive officer Jon Winkelried said in a statement to VCCircle. TPG didn't disclose the size of the stake it has bought.
“The secondary market has emerged as an important tool for asset managers and investors to actively manage their portfolios,” he said.
NewQuest managing partner Darren Massara said TPG’s platform will help the secondaries investor expand its business.
In secondaries transactions, a PE firm acquires an entire portfolio of investments from another investor. In some instances, an investor can also acquire the limited partner’s stake in a PE fund.
The secondaries market has grown since 2009 to become an important part of the PE industry. While the US and European markets are concentrated, the Asian market is more nascent and offers greater growth potential.
However, a private equity firm taking a stake in another PE firm is rare. In this case, TPG is looking to diversify into the secondaries market. A similar instance is Carlyle Group’s 2011 acquisition of asset manager AlpInvest to diversify its product portfolio ahead of its public offering.
Bloomberg News first reported the development. It also said that TPG invested in NewQuest from its balance sheet and not from any of its funds.
In India, TPG usually makes growth-equity or buyout investments. For instance, TPG-backed Manipal Hospitals is one of the bidders for Fortis Healthcare Ltd.
NewQuest has been steadily expanding its India presence and opened its Mumbai office in 2017. In 2016, it acquired most of the India portfolio of venture capital firm Draper Fisher Jurvetson.
NewQuest will continue to operate as before, across its offices in Hong Kong, Beijing and Mumbai, the TPG statement said.
Secondaries deals have been on the rise across Asia, including in India. Last month, the Rohatyn Group acquired JP Morgan’s infrastructure portfolio in India.
Also last month, VCCircle reported that a Gulf investor was close to acquiring IDFC Alternatives’ private equity and real estate portfolios. Earlier, IDFC Alternatives had sold its infrastructure portfolio to Global Infrastructure Partners.
In March, Hong Kong-based private equity firm TR Capital Group acquired a portion of Indian mid-market PE fund Tano Capital.