The race to tap larger capital pools from pension and sovereign wealth funds is pushing a wave of asset managers to scale up through stake acquisitions in their counterparts in emerging markets like Asia, where global private investors remain significantly under-allocated.
Among local shops that are being acquired are real asset specialist GLP’s $44 billion international business and two-decades-old SC Capital Partners, whose buyers are looking to enhance their presence in one of Asia’s real estate hotbeds like Japan.
ADM Capital’s stake sale to a Temasek affiliate and BPEA Credit’s aborted discussions to merge with Apollo underscore the growing appetite of institutional investors for private credit tailored to businesses in the region.
The diversification of new investment products and access to client lists could help asset managers accelerate their ambitions to become one-stop shops like Blackstone and KKR, offering its limited partners exposure to a wide variety of strategies across buyouts, growth equity, real estate, infrastructure and private credit in different geographies.
“Large asset managers will seek to diversify their own strategies by acquiring more focused players who are successful in executing their more limited strategies,” said Robert Elliot, Linklaters’ corporate M&A partner, who has advised on private equity-linked transactions from the Singapore office.
In Asia, it is no longer unusual for larger players to have multiple strategies across private equity, real estate, infrastructure, and credit – or a combination of those, he added.
This year is poised to break records for GP acquisitions, surpassing the peaks set in 2021 and 2015, according to Pitchbook projections. In July alone, GPs completed 84% more acquisitions of their fellow managers compared to the same period last year, with significant growth in both control and minority deals.
Deals targeting alternative assets manager by its peers
Real assets appeal
The string of acquisitions in real estate funds with major exposure in the Asia Pacific highlight the region’s appeal, which attracted $96.3 billion in investments in around the first 10 months of 2024, per JLL data.
Ares’s buyout of GCP International, whose $44-billion AUM primarily consists of warehouses, data centres, and energy transition projects, will enlarge its real assets presence in countries like Japan and Vietnam, Ares co-founder and CEO Michael Arougheti said during the firm’s third-quarter earnings call.
“Following our SSG acquisition in 2020 and Crescent Point last year, we have been strategically evaluating inorganic growth opportunities in the region and GCP International scale, asset positioning, track record and team represented far and away the most compelling opportunity of the nearly 40 managers that we considered,” Arougheti said.
The transaction will also uplift Ares’s industrial real estate capabilities in Europe and Brazil, where GLP manages around $3.1 billion in AUM as of January 2024, while nearly doubling the AUM of its real estate business to $96 billion across North America, Europe, Asia, and Latin America.
The $3.7-billion purchase of GCP International, which came with nearly $20 billion in AUM that is invested in Japan’s industrial real estate, is a good example of how the country remains a hot hunting ground for global investors. The extensive Japan portfolio, which accounts for almost half of GCP’s AUM in the deal, consists of one of Japan’s largest local real estate investment trusts, known as J-REIT, and another perpetual vehicle.
Another real estate major CapitaLand Investment is also expanding into the J-REIT market for the first time via Japan Hotel REIT Advisors, whose majority owner is its recently acquired SC Capital. The takeover will triple CapitaLand’s funds under management in Japan from S$2.9 billion to approximately S$11 billion with SC Capital’s FUM, of which 76% is in the country.
SC Capital currently manages a yen-dominated strategy for Japanese hospitality assets that most recently gathered $1 billion in the debut fund.
Among the tailwinds for investments in Japan’s real estate is the disposal of non-core assets by Japanese companies, according to CapitaLand’s CEO Chee Koon Lee.
“The Japanese government has made it quite clear that they want the Japanese companies, especially the listed ones, to drive return on equity to make sure that they can trade above NAV. So there are many restructuring possibilities amongst the Japanese companies where some of them have to share their non-core real estate assets,” said Lee at an investor conference in November.
CapitaLand is also inheriting SC Capital’s flagship fund series that is currently deploying from its sixth fund and an open-ended core-plus real estate fund for APAC.
| Acquirer | Target GP | Share ownership | Deal | Business | Underlying strategy and vehicle (not exhaustive) | Size | Founding year | Headquarters |
|---|---|---|---|---|---|---|---|---|
| CapitaLand | Wingate | Majority | A$200 million acquisition with earn-out agreement over a three-year period | Investment manager focusing on real estate in Australia | Senior debt, corporate credit fund, cash management trust, direct property investment | $1.6 billion in FUM | 2004 | Australia |
| Starwood Capital | ESR | directly 10.7% and nearly indirectly 40% through a consortium | $7.11 billion privatisation in a consortium led by Starwood, US credit shop Sixth Street and New York-based SSW Partners with participation from Warburg Pincus, and ESR's founders | APAC’s real asset manager | Logistics, data centres, S-REIT, C-REIT and other public vehicles | $154 billion in AUM | 2016 (formed through a merger) | Hong Kong |
| CapitaLand | SC Capital | Initial 40% | Acquisition of 40% stake for S$280 million with expected full ownership by 2030 | Pan-Asia real estate investment manager | APAC opportunistic real estate, APAC core-plus, Japan's hospitality, J-REIT | S$11 billion in FUM | 2004 | Singapore |
| Ares | GLP's GCP International | Majority | $3.7 billion acquisition of GLP Capital Partners' business outside of Greater China and existing capital commitments to certain managed funds | Global alternative asset manager specialising in industrial real estate with assets across Asia, Latin America and Europe | Logistics, industrial real estate and other public vehicles | $44 billion in AUM | 2009 | Singapore |
Source: Data compiled by DealStreetAsia based on public information
Meanwhile, US real estate major Starwood Capital is getting exposure to APAC’s largest REIT managers and sponsors through the $7.11 billion take-private deal of ESR that it led in a consortium consisting of fellow fund managers Sixth Street and SSW Partners. The Warburg Pincus-backed group, also GLP’s arch-rival in the region, has been suffering low share price on the Hong Kong Stock Exchange after going public in 2019.
The hostile takeover would significantly expand Starwood’s footprint in Asia, whose $115 billion AUM is mostly concentrated in the US and Europe. ESR has approximately $154 billion in AUM, mainly invested in logistics properties and digital infrastructure across developed Asian markets and India, sectors which Starwood’s billionaire founder Barry Sternlicht said to be key growth areas of his firm.
ESR’s largest allocation is in Southeast Asia where it manages about $15.8 billion in assets, followed by Australia and New Zealand ($15.1 billion); and South Korea and Japan ($14.4 billion), according to an investor presentation.
While the exact number of shares Starwood owns within the consortium remains unclear, the partners collectively hold nearly 40% of ESR, per a recent filing. Starwood had previously acquired a 10.7% stake in ESR in March.
“The Asia Pacific region offers a compelling cyclical and structural opportunity. Global real estate investors can benefit from strong regional growth, differentiated markets delivering uncorrelated performance and access to sectors still early in their evolution. Investing in the region can enable investors to capture growth, without adding risk,” said BlackRock in its year-end note.
APAC credit gold rush
Beyond real estate funds, the appetite for acquiring APAC managers spans all strategies within the private credit sector as investors are looking to get a bigger slice of the private credit market that has outperformed the US and Europe.
Unlike Ares and KKR, Apollo has yet to announce a dedicated commingled fund franchise for private credit in Asia, a region that counts Singapore and Mumbai among its regional headquarters. That may explain why Apollo was in a merger talk with the then-BPEA Credit (now Ascertis Credit) to tap the underlying performing credit portfolio in India and Southeast Asia.
The growth in assets under management of private debt in APAC has outpaced other regions, rising by 19.5% from 2020 to 2023, compared with the global average of 11.5%, according to the latest data from Preqin. At $99.3 billion, the AUM of private debt in the region now accounts for 6.6% of the global AUM at $1.5 trillion.
| Acquirer | Target GP | Share ownership | Deal | Business | Underlying strategy and vehicle (not exhaustive) | AUM | Founding year | Headquarters |
|---|---|---|---|---|---|---|---|---|
| Scarcity Partners | January Capital | 20% | Acquisition by a GP stake fund with a semi-liquid vehicle | Asset management specialising in investments in technology companies in APAC | Venture capital, venture debt | $300 miillion | 2012 | Singapore |
| Seviora Holdings | ADM Capital | Minority | Strategic acquisition with distribution and joint venture agreement | Private credit fund manager for APAC | Direct lending, climate credit | $1.6 billion | 1998 | Hong Kong |
| Nikko Asset Management | Tikehau Capital | Minority | Strategic acquisition | Global alternative asset manager | Diversified with largest share allocated to private debt, followed by real assets, private equity, and capital markets, respectively | €47.1 billion | 2004 | France |
Source: Data compiled by DealStreetAsia based on public information
Seviora Holdings has emerged as another Temasek-linked group bucking the trend with the purchase of minority stakes in ADM Capital, a mid-market lender. The acquisition would give Seviora exposure to ADM’s strategies in secured direct lending and climate-focused credit in APAC, an addition to the bespoke credit solutions and performing credit portfolio of its subsidiary Seatown Holdings.
Market observers told DealStreetAsia that Seviora may consider increasing its stake and eventually take control of ADM, similar to Keppel, which fully absorbed Pierfront Capital (now Keppel Credit) last year after initially purchasing a half-stake in the infrastructure lender in late 2019.
“Markets for leveraged buyouts and high-yield instruments are still nascent in many parts of APAC, creating an even greater need for private debt solutions,” said Michel Lowy, co-founder and CEO of SC Lowy. Private lenders are hence “uniquely positioned” to address the gaps, particularly as traditional banking systems in the region often lack the flexibility to cater to middle-market and SME borrowers, he added.
Besides the lack of a succession plan, GPs selling their minority stakes to another asset manager are often motivated by the benefit of strategic partnerships that could help secure bigger GP commitments in subsequent funds and expand into new product offerings and LP pools.
January Capital was among such GPs in the transaction that saw Scarcity Partners buying 20% into the Singaporean startup investor. The news came days before January, known for its equity investments in startups, announced the $85 million first close of its debut private credit fund for technology companies in APAC.
France’s €47.1 billion asset manager Tikehau Capital, which has been adding external institutional shareholders to its cap table in the past years, also sold a minority stake to Japan’s Nikko Asset Management. The deal came with a partnership that includes Nikko’s exclusive distribution agreement for Tikehau Capital’s products, including its European direct lending, private equity decarbonisation and private debt secondaries strategies as well as a joint venture that will see Tikehau helping Nikko set up private market strategies for Asia, including climate.
Road ahead
The world’s largest asset manager BlackRock heralded the beginning of 2024 with the takeover of GIP and is wrapping up the yearend with the acquisition of credit giant HPS, signaling that the consolidation wave may not stop in the near term.
One private equity expert predicted that GP-level consolidation will remain on the horizon for the next 5-10 years for established fund managers. “This trend is expected to persist, allowing existing players to enhance their positions as the industry matures,” according to Laurent Capolaghi, Ernest & Young’s Luxembourg partner and private equity leader.
The private equity industry is moving toward dominance by large, diversified firms, potentially sidelining smaller niche players, similar to the banking sector’s transformation in the 1990s, he added.
