The Carlyle Group Inc. CG has delayed the closing of its latest pan-Asian buyout fund. According to Bloomberg, this delay occurred as investors were increasingly directing their interest and capital into other Japan-focused funds.

CG has sought an extension to finalize its sixth regional buyout fund, which was launched more than two years ago and has only managed to secure $3 billion in commitments below its initial target of $8.5 billion. Typically, raising such funds takes around 18 months.

The slower-than-expected fundraising is owing to heightened caution among global investors, who are concerned about overpaying for assets and uncertain exit prospects, which has resulted in more comprehensive due diligence processes.

Moreover, as foreign investors concentrate more on Japan, attention has been diverted from the pan-Asian fund by Carlyle's $2.9 billion Japan fund, which closed in May and is about 70% bigger than its predecessor. Since the beginning of the year, Carlyle has raised close to $6 billion in Asia, including $950 million for its second growth fund.

With the rising geopolitical tensions, challenging exit conditions, issues related to capital distribution and substantial losses from investing in the Chinese market in recent years, investors have been cutting allocations to pan-Asia funds as they focus more on their home markets.

However, a few investors continue their optimism regarding the Asian market as they have received favorable returns from certain managers who have stable teams and exposure to markets like Japan, India and Korea.

Per the Bloomberg report, investors in the new Asia fund are expected to benefit from access to opportunities to invest in the Japanese market, including the $610 million acquisition of KFC Holdings Japan, announced on Jul 10, 2024.

Carlyle is targeting a 50% reduction in the China exposure in its sixth Asia fund and aims to have the exposure further reduced to 20% in the next fund cycle. The firm also has its sights set on expanding opportunities in the Asian markets similar to other financial firms like KKR & Co. Inc. KKR and Bain Capital. KKR is looking to enter the private credit market in Japan to offer an alternative to bank loans.

Similarly, to increase its foothold in the Asian market, Mitsubishi UFJ Financial Group, Inc. MUFG and its consolidated subsidiary, MUFG Bank, are set to invest in Globe Fintech Innovations, Inc. Taking advantage of the growing market, MUFG invested in several digital startups and tech firms in the APAC region since 2020.

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