Ex-Deutsche Banker Seeks $800 Million in ‘Challenging’ Market

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(Bloomberg) — Templewater, an alternative investment firm co-founded by a former Deutsche Bank AG banker, is seeking as much as $800 million for two funds in Asia, in what it calls a “challenging” market with fundraising close to a decade low.

The new funds will target mid-sized firms in Asia and clean energy technology companies, said Cliff Zhang, who started the company in 2018 with Investec Group,  an Anglo-South African banking and wealth management group. The $1.7 billion asset manager has started raising $400 million to $500 million for its second private equity fund, doubling its previous pool, and is seeking $300 million for a decarbonization fund, Zhang said in an interview.

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Templewater is bracing for the most difficult fundraising environment for Asia in at least a decade. Pension funds and key backers are maxed out on the amount they’re willing to allocate to private equity firms, particularly in Asia, because the funds have been slow to return money to investors. The firm is betting that an expected 65% capital distribution from its first fund by the end of this year will persuade existing backers and new investors to participate in the second fund, Zhang said.

“We believe that true opportunity often presents itself in the midst of adversity,” said Zhang. “We’re raising capital now to seize the moment to invest in transformative businesses that are poised for growth as the world emerges from recent upheavals.”

The Hong Kong-based fund has thus far returned 14% of its capital to investors, he said. Following his exit at Deutsche Bank’s corporate finance division in 2013, Zhang was named senior vice president at Chow Tai Fook Enterprises Ltd. a privately owned conglomerate controlled by billionaire Henry Cheng. The Harvard University grad also worked at HSBC Holdings Plc. 

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The firm is seeking to tap funds from institutional investors and wealthy individuals in Asia and the Middle East, Zhang said. Fundraising for Templewater’s first $200 million fund in 2019 dragged on until December 2021 due to protests in Hong Kong and the pandemic. The fund didn’t make any investments in 2022 as rising interest rates and shaky markets put the brakes on investment activity.

According to Preqin Ltd., in the first six months of 2023 firms in the region had raised just 22% of the previous year’s total, after private equity fundraising in China dropped significantly. As of August, there had been just nine funds closed in the region, raising a combined $2.7 billion, with the number of fund closures on track for a decade low, according to PitchBook data. 

Templewater’s decarbonization fund has already secured commitments from Hong Kong-listed CIMC Enric Holdings Ltd., a gas equipment maker, along with Canadian fuel-cell maker Ballard Power Systems Inc. The fund invests in global technology companies in the hydrogen value chain, energy storage and carbon capture. The new private equity pool will focus on healthcare, mobility, essential services and precision manufacturing in Asia. Last year, the firm bought 51% of Luye Medicals Group Pte’s oncology and cardiology businesses in Singapore.

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The decarbonization fund targets investors seeking to comply with sustainable finance regulations imposed by the European Union, requiring disclosure on how firms promote environmental and social objectives through investments rather than just considering sustainability risks.

Templewater developed Hong Kong’s first hydrogen refueling station and its first hydrogen double-decker bus. It signed an agreement last week with Abu Dhabi to develop a series of green solutions including a solar plant, developing hydrogen refueling stations and managing battery and fuel cell electric bus fleets. Its portfolio company, Wisdom Motor, delivered the United Arab Emirates’ first hydrogen bus at the COP28 climate summit last year.

Investec spun off its Asia principal investment division in 2021. Templewater is Investec’s exclusive private equity investment arm in Asia excluding India.  

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