Shan Weijian, the former TPG executive who now leads private equity firm PAG, has raised $3.6bn for his second Asian buyout fund, joining the fundraising rush in the region

Shan Weijian, the former TPG executive who now leads private equity firm PAG, has raised $3.6bn for his second Asian buyout fund, joining the fundraising rush in the region

The fundraising comes at a time when there are conflicting trends about the extent to which there is a credit crunch in Asia

Many private equity firms expect banks in the region to curb lending as corporate borrowers struggle. Executives at many investment groups hope that if the banks retreat, it will leave a gap that their capital can fill

However, in some parts of Asia, private equity, distressed and venture capital funds have raised such large sums that Mr Shan thinks there is too much capital trying to be invested, which could hit returns to investors

In recent months, Singapore-based RRJ has raised $4.5bn, and Bain Capital has raised $3bn, while Barings Private Equity raised $4bn earlier last year, joining KKR which raised $6bn

Mr Shan’s first buyout fund, which closed with $2.5bn just over three years ago, has already returned $1.5bn of capital so far and has a gross internal rate of return of about 30 per cent

Mr Shan expects the most profitable opportunities to come from companies that cater to domestic demand from a rising middle class, particularly in China, and invest in entertainment, healthcare and financing firms as well as internet apps

However, it is still possible to lose significant amounts of money in those sectors, with growth does not necessarily leading to profitability, given the intense competition

“There is always too much capacity, competition and capital,” Mr Shan said. “The key is to identify and build businesses that have barriers to entry.”

Emerging markets, particularly in Asia and Latin America, have not had a particularly strong period in recent years, faced with everything from a downturn in commodities prices to regulatory uncertainties