Speech by Mr Tharman Shanmugaratnam, Deputy Prime Minister and Chairman, Monetary Authority of Singapore, at the Opening of KKR's Singapore Office at the Fullerton Hotel on 25 October 2012
Mr Henry Kravis, Chairman KKR
Ladies and Gentlemen,
It gives me great pleasure to join you at this event, marking the opening of KKR’s Singapore office. KKR has been in Asia for almost three decades, and committed more than US$5billion to companies in the region. The addition of a Singapore office as a key hub in KKR’s regional network comes at a time of continued uncertainty in the global economy, but also increased investor interest in Asia.
2 Institutional investors are increasing their allocations in Asia, both in public markets and through private equity. The demand for funds in the region is also growing faster than in any other region, in line with the growing need for investments in infrastructure as the consumption needs of a burgeoning middle-class across the region. What will be equally interesting is the changing composition and mix of financing in the region. Traditional bank financing is likely to do well, but prospects for non-bank capital financing are even stronger.
3 Private equity is an important slice of this. Asian-focused private equity funds have grown significantly over the last decade. The industry is estimated to have grown by almost 4 times in the last decade, to about US$376 billion of assets in 2012. The Asian region now accounts for more than 12% of total global private equity investments, up from 6% in 2000. This is a significantly larger proportion than the allocation of public market equity investments to Asia
4 It is also likely to increase further in coming years. Asian-focused funds alone (not counting global funds investing in Asia) are already looking to raise US$130 billion, making up approximately 17% of the total capital now sought by PE fund managers globally. (This is close to the level of fund-raising activities seen in Europe-focused funds.)
5 A number of factors are driving this growth of private equity in Asia. First, the stronger long-term growth prospects of emerging Asia, compared to other regions. Asia is also providing a viable opportunity for firms to diversify beyond developed markets.
6 Second, the broadening of investment opportunities within Asia. Over the last decade, due to their strong growth rates and the size of their markets, China and India have attracted the most amount of interest from institutional investors. However, South East Asia is increasingly on the investment radar. According to Preqin, there is now a greater interest by international investors to diversify beyond Greater China and India into ASEAN, compared to a year ago.
7 The increased interest in South East Asia is not hard to understand. Indonesia, the most populous nation in South East Asia, is seen as largely untapped by the private equity industry, and is poised to grow over the next decade or so. It has seen much interest from investors, drawn to the rising affluence of its middle class. Vietnam too is attracting growing interest, with M&A deals growing rapidly.
8 However, more than being providers of capital, private equity players can make a real and positive economic impact and contribute meaningfully to Asia’s growth, by helping to build up operational and business expertise in their portfolio companies and open up markets for their products and services.
9 The private equity industry is now a key player in Asia’s evolving financing landscape. The KKR office in Singapore is testament to KKR’s long term view of opportunities in the region, and I commend its desire to become more local even as it looks to tap on the investment opportunities in South East Asia. I congratulate you on the opening of your Singapore office and look forward to a long and fruitful partnership with you in Singapore.
1 The Business Times “Barbarians at the Asian Gate” , September 2012
2 Preqin Special Report: Asian Private Equity, September 2012
3 Preqin Special Report: Asian Private Equity, September 2012