Increasing demand for health care and other services and for better infrastructure are creating opportunities for equity investments in Southeast Asia. Photo credit: ADB.
Investments in private equity funds Creador V and Northstar V will help create jobs, improve services, and foster good corporate governance.
The Asian Development Bank (ADB) announced this month that it is investing in two private equity funds, which will provide growth capital to companies in Southeast Asia.
ADB committed $60 million in equity investment to Creador V L.P., managed by Creador a leading institutional private equity platform in Southeast Asia that also invests in South Asia. In Southeast Asia, Creador V is targeting middle-market companies operating in business services, consumer goods and services, health care, pharmaceuticals, financial services, and manufacturing in Indonesia, Malaysia, the Philippines, and Viet Nam. It is also considering investments to support businesses in Singapore and Thailand.
ADB also signed a $39.5 million equity investment in Northstar Equity Partners V Limited (NEP V), a private equity fund managed by the Northstar Group. NEP V will provide growth capital to companies operating across the consumer, financial services, and digital economy sectors in Southeast Asia with a focus on Indonesia.
NEP V may also invest in promising early-stage companies to support the rapid digitization of businesses, helping these companies scale, acquire new customers, and expand into underpenetrated markets.
Creador was established in 2011 and has since successfully launched five private equity funds, totaling approximately $2 billion in committed capital as of December 2021. This is ADB’s third investment in a Creador-managed fund following investments in Creador III, L.P. in 2016, and Creador IV, L.P. in 2018.
Established in 2003, the Northstar Group manages more than $2.5 billion in committed equity capital dedicated to investing in growth companies in Southeast Asia, mainly in Indonesia. Northstar’s investments include Indonesian unicorn Gojek, which started as a ride-hailing app.
A dynamic market
Equity investments are an important source of capital for companies in Southeast Asia, especially high-growth small and medium-sized enterprises that are developing new products and expanding operations.
Investment activity in the region has been robust despite the COVID-19 pandemic.
According to research by Google, Temasek, and Bain, investments by private equity and venture capital in the digital economy alone are at a record high in 2021 with the value of deals at $11.5 billion in the first semester, compared with $11.6 billion in the whole of 2020.
A report from Ernst & Young Global notes several emerging trends and opportunities in the region. Family-owned conglomerates are opening up and partnering with private equity funds to grow their business. A rising middle class, large young population, and rapidly urbanizing cities, such as Jakarta and Ho Chi Minh City, are increasing the demand for better consumer, health care, financial, education, logistics, and technology services and infrastructure, creating opportunities for equity investments.
Creating jobs and economic wealth
Aside from financial returns, private equity investments can also deliver development results. Improving companies’ access to growth capital is expected to open more job opportunities, increase tax revenues, and advance economic development.
Equity investments also help foster good corporate governance and risk management and raise environmental and social standards in private enterprises.
As part of ADB’s investment, Creador will adopt gender initiatives to promote greater financial inclusion of women through investments.
ADB will also provide guidance as the Northstar Group implements a more robust environmental, social, and governance approach and looks to enhance gender equality in its operations and across its portfolio of investee companies.
This article was first published by BIMP-EAGA on 18 January 2022.
