NEW YORK -- Private equity funds are increasing their investments in young Southeast Asian companies, helping to expand their operations and spurring economic growth in the region, in stark contrast to their dwindling interests in China and India.
Private equity funds invested a total of $3.5 billion in shares of unlisted companies in Southeast Asia as of the end of 2013, twice as much as the previous year, according to the U.S.-based Emerging Markets Private Equity Association (EMPEA). In 2010, the figure was a mere $1.1 billion.
Fund managers take money from institutional investors, such as pension funds, and put it into promising unlisted firms and other investment targets. They place their bets on a wide range of companies, from resource and infrastructure companies engaged in large development projects in Southeast Asia to domestically focused consumer goods makers, in the hope that a few big hits will make a mint for their clients -- and themselves.
U.S. investment fund Kohlberg Kravis Roberts announced May 27 it had agreed to buy major Singaporean packaging materials maker Goodpack for about 1.4 billion Singapore dollars ($1.11 billion), KKR's largest investment in the region.
In October of last year, the fund invested $200 million in Malaysian helicopter transportation company Weststar Aviation Services.
Warburg Pincus, another U.S. private equity player, bought a $200 million stake in Vincom Retail of Vietnam. The U.S. fund is discussing a number of deals worth more than $1 billion each.
Maryam Haque, head of data and analysis at EMPEA, said private equity funds are exploring investment opportunities in untapped markets in Southeast Asia.
By contrast, the funds are reducing their involvement in China and India. In 2013, their investments in China came to $7 billion, down 6% from a year earlier and nearly 40% below their peak in 2011. Investments in India have fallen by about half over the same period.