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The Abu Dhabi Investment Authority is seeking to take advantage of the withdrawal of Western investors from China by offering to buy their shares at a discount in funds managed by Hong Kong-based PAG.
The move by Abu Dhabi's main sovereign wealth fund, described by four people familiar with the matter, is a sign of how some Gulf investors are looking to snap up deals as US-based investors reduce their exposure to China.
“It's a shift from American investors who… [previously] “It favored China,” said a person familiar with the plans, “toward Middle Eastern investors who don’t have the same concerns they do.”
PAG, in which Blackstone has a minority stake, has developed a reputation for providing global investors with access to deals in China, using relationships built by its chairman Weijian Shan, who holds a seat on Alibaba's board.
It is one of the largest private equity groups in Asia, with more than $55 billion under management, and its investors include government pension programs in California, Texas, Florida and Iowa, as well as investment funds in Canada, Australia and across Europe.
It has struggled to raise a new fund since Chan criticized Beijing in 2022. PAG filed for a $2 billion initial public offering in 2022 in a deal that would have valued it at up to $15 billion, but a listing did not materialize.
Four of PAG's five biggest deals since 2019 have been in China, according to London Stock Exchange Group figures. They include investments in Zhuhai Wanda, the operator of the Dalian Wanda shopping mall, and online video platform IQIYI.
As of June last year, two of the funds ADIA was offering to buy stakes in – which were raised in 2015 and 2018 – had returned just 53 per cent and just 13 per cent of the amounts paid by investors, according to Calstrus filings. , the teacher pension system of the United States. PAG's first buyout fund, raised in 2012, gave investors 1.8 times the money they paid on the same date.
Buyout funds typically aim to return investors' money, plus returns, within a decade.
PAG, which invests across Asia, including in credit and real estate as well as private equity, had raised nearly $3 billion for its planned new fund by the beginning of this year, according to four people familiar with the situation. It previously told investors it aimed to close the fundraising by the end of 2023, two of those people said.
The fund's original target was $9 billion, according to Reuters. It had raised just $2.2 billion by March last year, according to filings with the US Securities and Exchange Commission.
Under the deal, Adia – which has a long-standing relationship with PAG – will offer to buy out investors' stakes in PAG's funds at a discount, in a deal facilitated by the buyout firm. Investors can choose whether they want to sell their shares.
One PAG investor said the buyout group brokered the Adia deal to provide an opportunity for others to exit because “they want to [investors] Who are committed to continued investment in China, which has much of the United States and Europe [groups] incorrect”.
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Adia declined to comment. PAG did not respond to repeated requests for comment. In early March, a PAG spokesman said it was “certainly incorrect” to say it had raised $3 billion, adding: “We can’t give a figure yet because the fund has not closed yet.”
Pension funds and other investors in the United States are increasingly wary of investing in China. Geopolitical tensions have led to US restrictions on investments there, while Beijing's crackdown has made it difficult for Chinese companies to list abroad.
A significant portion of the money in two of PAG's funds is tied to Chinese industrial gases company AirPower Technologies, which PAG originally backed in 2017, the people said. PAG has agreed to sell AirPower, but regulators have not yet approved the sale, they added.
