Goldman Sachs targets $2 billion for first Asia-focused private equity fund, sources say

By Kane Wu

HONG KONG (Reuters) - Goldman Sachs aims to raise $2 billion in its first Asia Pacific-focused private equity fund, two people with knowledge of the bank's fundraising plan said, as it looks to deepen exposure to some of the world's fastest-growing economies.

The fund-raising effort comes as private equity firms in Asia reshape investment strategies and country allocations amid geopolitical tension, a higher interest rate environment, market volatility, and macroeconomic headwinds.

Goldman Sachs Asset Management, the bank's investment arm, has been marketing the new fund to sovereign wealth funds, pension funds and private investors, setting its sights on a first close by the fourth quarter, the sources said.

The fund, whose target size is being reported for the first time, will focus primarily on investment opportunities in Japan, with about half its capital expected to be allocated to there, one of the sources said.

India, South Korea, and Australia will also be key markets for the fund, the source said.

Both sources sought anonymity as they were not authorised to speak to the media.

A spokesperson for Goldman declined to comment.

In the first half of 2024, Asia-focused private equity fundraising was up 4% on the year at $52.7 billion, but still a far cry from the first-half average in the past decade of $131.7 billion, says industry data provider Preqin.

Global investors have been particularly cautious about deploying capital in China, deterred by its economic slowdown, regulatory crackdown and Sino-U.S. tension, which have all weighed on Asia fundraising by global private equity firms.

Only five China-focused private equity funds were raised in the first half this year, totalling $2.2 billion, Preqin data showed.

On the other hand, Japan has become a hot spot for private equity firms as a cheap yen currency, buoyant public market and policy drives to improve corporate governance make its stocks and assets more attractive.

Japan's benchmark Nikkei racked up its biggest absolute rise ever for the year ended March 29, after having hit record levels since February. It is up 23% this year.

Private equity-backed mergers and acquisitions in Japan stood at a record $35.5 billion in 2023, after their numbers rose steadily in the preceding decade, LSEG data showed.

Stephanie Hui, Goldman's head of Asia private equity and global co-head of growth equity, told an Australian paper in March the firm was looking to raise an Asia-focused vehicle, and planned to increase investments in Japan and India.

One of the sources told Reuters that Goldman, which manages more than $90 billion in private equity assets globally, including buyouts and growth investments, would also continue to look at opportunities in China.

The Wall Street bank's 18-strong Asia private equity team, led by Hong Kong-based Hui, has deployed $17 billion across 242 investments in the region, its website says.

In February Chief Executive David Solomon said Goldman would raise its ninth global private equity fund this year. The bank has been in the private equity business for more than 30 years.

Since Solomon took the reins in 2019, the bank has been reducing use of its own balance sheet in asset management, by tapping external capital for investments, aiming to boost earnings from fees.

Over the last five years, the bank has invested in more than 60 companies in Asia, such as Japan's Nippo Corp and Chinese software company Shenzhen Qianhai 4Paradigm Data Technology Co, Dealogic data showed.

Goldman was also among the earliest investors in China's e-commerce giant Alibaba Group in 1999, before it became the nation's major online shopping marketplace.

(Reporting by Kane Wu; Editing by Sumeet Chatterjee and Clarence Fernandez)