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TPG Enters Private Equity Secondaries With Asia-Focused NewQuest

(Bloomberg) -- TPG is getting in on the booming market for secondhand private equity interests.

The alternative asset manager is taking a minority stake in NewQuest Capital Partners, a secondaries private equity firm focused on the Asia-Pacific region. TPG is investing in Hong Kong-based NewQuest with its balance sheet -- not via a fund -- and NewQuest will continue to operate independently. TPG declined to disclose the size of the stake.

“We see an opportunity to back a highly experienced team with a differentiated strategy and leading position in Asia’s rapidly growing secondary market,” TPG Co-Chief Executive Officer Jon Winkelried said in an emailed statement. “The secondary market has emerged as an important tool for asset managers and investors to actively manage their portfolios.”

Secondaries deals typically refer to the trading of pre-existing investor commitments to a fund or funds. The secondary market has grown to include the buying and selling of direct investments in portfolio companies. 2017 was a record year for the market, with $60.7 billion in completed transactions, according to a volume report from Setter Capital.

The market for secondaries, which provides liquidity to fund investors, has grown rapidly as the practice has broadened into a way to rejigger investment exposures, rather than serving primarily as an exit for distressed sellers. The 2017 figure marks a 69 percent jump from 2013, when Setter estimated $36 billion of transaction volume.

With North America and Western Europe accounting for most of assets purchased, the Asia-Pacific region remains largely untapped. Asia’s share of global secondary volume -- 11 percent -- is less than its representation in global funds raised, to according to Preqin Ltd. and Setter data.

Sweet Spot

That opportunity for secondary growth is a sweet spot for NewQuest, which has focused on the region since its founding in 2011. The firm buys direct interests in a fund’s company holdings -- known as a direct secondary -- as well as limited partnership interests. TPG and NewQuest will look to partner on expanding NewQuest’s platform.

“The partnership with TPG is a testament to our market leading position, strong team, and differentiated approach,” NewQuest Managing Partner Darren Massara said. “Through the partnership, we gain access to resources and expertise from across the TPG platform to enhance the NewQuest business.”

The NewQuest team spun out of Bank of America Merrill Lynch’s Asian Private Equity group. It oversees $1.25 billion, according to it’s website, and is currently deploying its third fund, which closed on about $540 million in 2016.

The NewQuest partnership extends the reach of TPG, which manages $82 billion across private equity, credit, real estate and hedge funds. The firm, headquartered in Fort Worth, Texas, and San Francisco, promoted fundraising head Jack Weingart to co-lead its flagship buyout funds with Todd Sisitsky, people familiar with the matter said last week.

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