KKR’s Most Senior China Executives Exit as Firm Plans Fund (2)

(Bloomberg) -- KKR & Co., one of the biggest private equity investors in Asia, is losing two senior executives who helped build its China business in the past decade.

David Liu, head of China and co-head of Asia private equity, and Julian Wolhardt, a partner in the firm, are leaving at the end of this year to form a China-focused investment firm, the company said in a release Tuesday. Ming Lu, previously co-head of private equity for Asia, has now been named sole head, and interim head of China, KKR said.

When they depart, KKR will be losing its two most senior China executives who have been investing in the country for two decades and were behind some of the firm’s most successful investments. Before joining KKR in 2006, Liu, 45, and Wolhardt, 43, worked together at Morgan Stanley’s private equity arm.

“David and Julian are among the savviest investors in China,” Wu Shangzhi, chairman and founder of CDH Investments Fund Management Co., one of the nation’s oldest private equity firms, said by e-mail. “They have very strong local networks and are highly respected by Chinese entrepreneurs because of their deep local insights and successful investments.”

The announcement of their departures comes as KKR plans the launch of its third Asia fund, likely by the end of this year, which may raise as much as $7 billion, according to people familiar with the move, who asked not to be identified because the matter is private. KKR’s second Asia fund has generated an annualized net internal rate of return of 25 percent since its inception in July 2013, one of the people said.

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Anita Davis, a Hong Kong spokeswoman at KKR, declined to comment on the fund-raising plan.

Liu and Wolhardt oversaw some of KKR’s biggest investments in China including stakes in China Modern Dairy Holdings Ltd. and Fujian Sunner Development Co. The Haier investment, made in September 2013, generated an annualized gross return of about 20 percent through March this year, according to the person. Sunner, made in August 2014, returned about 30 percent up to the end of the first quarter, the person said.

Sunner’s share price closed at 28.54 yuan Tuesday, more than double the 12.30 yuan a share KKR paid for its stake, according to a filing from the Chinese company.

The two also led a $150 million investment in China Modern Dairy Holdings Ltd., KKR’s first food deal in China, in September 2008. In 2013, KKR sold most of its stake in Modern Dairy to China Mengniu Dairy Co. -- earning the firm a roughly 300 percent return on its investment.

Liu, a Columbia University graduate, started his career in Morgan Stanley in 1993 and was joined by Wolhardt four years later. The two oversaw the U.S. bank’s disposal of shares in Ping An Insurance (Group) Co. in 2005, one of the most successful Chinese private equity deals of that year.

Several private-equity veterans have left global firms in recent years to set up their own funds. Among them is Shan Weijian, who left TPG Capital in 2010 to form PAG Asia Capital first fund. He was followed a year later by Mary Ma, who quit Texas-based TPG to help found Boyu Capital.

Lu will serve as interim head of China until the firm appoints a successor, KKR said in its statement. The firm said it hired Ashish Shastry as its head of Southeast Asia from Northstar Group. It also hired three managing directors including Zhen Ji from Citic Capital Holdings Ltd. for its China business, Hyoung Seok Lim for Korea, while Rob Yang, formerly with Blackstone Group LP, joined earlier in the summer to lead KKR’s real estate business in Greater China.

(Updates with new hires in last paragraph.)

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net. To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Darren Boey

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