Morgan Stanley’s new Asia private equity fund

Morgan Stanley Private Equity Asia has raised $1.5 billion for its third fund to invest in companies in this region.

Around 80% of the investors in the new fund are institutions, including a number of sovereign wealth funds. The largest representation is from endowments and foundations in the United States, which tend to be more active in the alternative space. Other investors include banks, insurance companies, corporate pension plans, select high net worth clients and Morgan Stanley and its employees. The book was closed in around six months.

Chin Chou, chief executive officer of Morgan Stanley Private Equity Asia, says the fund aims to find investment opportunities in China, South Korea, Singapore and Taiwan, where the company has already established track records since 1993. In addition, the fund will also explore investment opportunities in Japan, India and Australia.

Except for a previous investment in eAccess in Japan, Morgan Stanley Private Equity Asia has not invested in Japan, India or Australia. The company, which has a team of around 30 professionals in the region at the moment, will be building out its teams in those three markets.

As well as established teams in Hong Kong, Seoul and Beijing, Morgan Stanley Private Equity Asia now has “a team on the ground in Japan and plans to open an office in India next year," says a spokesperson for the firm.

"We see opportunities in China - and also in a market like India, driven by rising domestic consumption. Other markets, such as Korea and Japan, are more restructuring plays," he adds.

The fund will have a traditional five-year investment period followed by a five-year harvest period.

In 2005, Morgan Stanley Private Equity Asia raised $515 million for its first private-equity fund dedicated to Asia. In 1999, the firm raised $300 million for an emerging markets private equity fund, which ended up being 95% invested in Asia. Both funds have been fully invested.

Morgan Stanley Private Equity Asia has made a number of private equity investments in businesses throughout Asia, including most recently Belle International, Dongxiang Sports and Shanshui Cement in China, Rotem and Ssangyong Corporation in South Korea, CTCI Corporation in Taiwan, and Asia Capital Reinsurance in Singapore.

In addition, it previously invested in Ping An Insurance and Mengniu Dairy in China, HTL International in Singapore and Landmark Investment Trust Company in South Korea. It sold the Landmark business to ING Investment Management earlier this year.

Morgan Stanley Private Equity Asia is part of Morgan Stanley’s global private equity group within the merchant banking division.