KKR Targets Southeast Asia's Family Businesses With Record Fund

(Bloomberg) -- KKR & Co., fresh off raising a record $9.3 billion fund, is gearing up to invest more in Southeast Asia as it seeks to capitalize on rising domestic consumption.

The private equity firm is seeking to invest in companies catering to the region’s expanding middle class, which is demanding higher-quality products, according to Ashish Shastry, KKR’s Southeast Asia head. These demographic changes will fuel long-term growth in industries like branded consumer products, health care, education, healthy foods and leisure, Shastry said in an interview in Singapore this month.

KKR sees opportunities as many of the region’s self-made business tycoons get older and begin handing the reins to a new generation of leaders. The transition may lead companies to shed assets to focus on their core operations, according to Shastry. KKR would like to do “a lot more” in the under-penetrated Indonesian market and could also boost investments in Vietnam and the Philippines, he said.

“Southeast Asia hasn’t fully realized its potential,” said Shastry, 41, who joined KKR last year after stints at TPG Capital and Northstar Group. “Given the family-owned business transformations across Southeast Asia in markets such as Indonesia and Malaysia, we see a great opportunity to invest even more in the region.”

KKR’s private equity funds have deployed more than $2 billion in Southeast Asia since the firm started operating in the region in 2005. Its biggest deal so far has been the 2014 buyout of Goodpack Ltd., a Singapore-listed provider of bulk containers, for S$1.4 billion ($1.1 billion). In April, KKR said it would spend $250 million buying stakes in Vietnamese conglomerate Masan Group Corp. and its meat business. 

Fish Sauce

That deal came after a previous investment in Masan Group’s consumer unit, which makes Chin-su premium soy sauce and Nam Ngu fermented fish sauce, that it finished selling in 2016. KKR has also backed Go-Jek, Indonesia’s first billion-dollar startup, which started as a motorcycle-hailing app before branching out into other on-demand services including food delivery and digital payments. Last year, KKR bought a stake in Jakarta-based animal feed producer PT Japfa Comfeed Indonesia Tbk.

Henry McVey, KKR’s New York-based head of global macro and asset allocation, in June upgraded his investment outlook for Indonesia after traveling there for the first time since 2013. Half the country’s population is under age 30, and private consumption accounts for a higher proportion of economic output than India or China. McVey said in a report this month he’s confident Indonesia is harnessing its long-term potential into near-term realities, and investors may not be fully up to speed on the compelling macroeconomic backdrop.

KKR sees opportunities to invest in Southeast Asia from its real estate, infrastructure, credit and special situations funds, after previously focusing on private equity deals in the region, Shastry said.

“Global capital flows will increasingly migrate towards economies with large domestic consumption,” he said. “We’ve been active in the region, but we have an opportunity to pursue even more opportunities given the attractive investment themes.”