Asia Pacific secondaries investor NewQuest Capital Partners is set to receive a $10-million payout from its controlling shareholder TPG if it manages to raise $1.75 million or more for the NewQuest Fund V.
US-based alternative asset manager TPG, which filed for a Nasdaq listing last week, said in its IPO prospectus that NewQuest will earn $5 million if its fifth fund surpasses $1 billion in capital commitments and an additional $5 million if it exceeds $1.75 billion.
TPG first acquired a 33.3% interest in Hong Kong-headquartered NewQuest for an aggregate price of $37.9 million in October 2018. In July this year, the US investment firm completed another 33.3% acquisition of NewQuest for $38 million. It added that it has helped NewQuest grow from approximately $0.9 billion in assets under management in 2018 to $2.4 billion as of September 30, 2021.
TPG said in the prospectus that the firm “believes that the acquisition [of NewQuest] provides the company with an opportunity to benefit from scale and expansion of its footprint in the Asia markets”.
TPG estimated the fair value of its first 33.3% investment in NewQuest to be approximately $155.4 million. In total, the purchase consideration has a fair value of $494.5 million.
The investment firm added it recognised a net gain of $112.5 million associated with the second acquisition of an interest in NewQuest.
NewQuest is part of TPG’s private markets solutions business, alongside its TPG GP Solutions unit. “The private markets solutions business is highly complementary to our existing investment capabilities and represents a strong growth opportunity for our business,” the $109-billion firm said in its prospectus.
Last month, DealStreetAsia reported that NewQuest was targeting to raise $2 billion for its fifth fund.
Commitments into NewQuest Fund V would mostly be follow-on commitments by existing limited partners (LPs), sources told DealStreetAsia. Singapore’s sovereign wealth fund GIC, LGT Capital Partners and Canadian pension fund CDPQ are understood to be among the LPs who will continue their capital commitments to the new vehicle.
In 2019, the secondaries specialist raised $1 billion for its fourth vehicle, the NewQuest Asia Fund IV, exceeding its original target of $850 million.
NewQuest closed its first fund at $400 million in April 2011. Subsequently, it raised $326 million for its second vehicle and $540 million for its third fund – both surpassing their fundraising targets.
As of September 30 this year, these first four funds delivered investment multiples from 1.3x to 3.2x, and net IRR from 16% to 37%, according to TPG’s IPO prospectus.