(Bloomberg) — TPG Inc. will soon close its eighth Asia buyout fund at around $5 billion, with the new portfolio set to slash its China allocation by more than half from prior regional funds, according to a person familiar with the matter.
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The investment firm plans to put about 10% of its Asia VIII pool in China, down from around 25% of invested capital in previous funds, according to the person, who asked not to be identified because the information isn’t public. TPG will allocate more than 80% in Australia, India and Southeast Asia — up from 70% in the predecessor fund, the person said. The rest will go to South Korea.
About $2 billion of the pool has already been invested, with zero investment in China so far. That has helped give the fund a strong start with a net internal rate of return of 129%, according to its earnings presentation last month. Around 70% of the initial spend has gone in India and Australia.
TPG’s exposure to China through the new fund will likely be among the lowest for global asset managers as Wall Street rivals from Carlyle Group to Warburg Pincus diversify away from China amid economic growth concern and escalating political tensions with the US. Japan and India are among the countries benefiting as capital flows to where returns are expected to be higher.
TPG early next month plans to announce the final close of the Asia VIII fund. A spokesperson declined to comment on the details.
Greater China, the region’s private equity powerhouse, suffered the biggest contraction in deal activity in 2022, contributing to a 53% drop in volume from a year earlier. That shrank Greater China’s share of Asia-Pacific deals to a nine-year low of 31%, according to a Bain & Co. report.
TPG’s $4.6 billion Asia VII fund has a net return of 14%, dragged by China investments, according to the person and public filings.
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