EQT Billionaire Takes On Wall Street Titans With Big Asia Push

(Bloomberg) -- Billionaire investor Jean Eric Salata’s first foray into Asia was painful: Five write-offs in India and mounting losses worth hundreds of millions of dollars. Times were so tough, he changed his computer password to “perseverance” as a daily reminder to keep going. 

Fast forward two decades, Asia is now a key growth driver for Salata’s current firm, EQT AB, which is taking the private equity world by storm with sizable cash outs and top level returns. It’s aiming to triple Asia investments to as much as $110 billion in five years, outpacing deployment in its home turf of Europe. Executives project another $10 billion in exits from the region over the next year, people familiar with the matter said.

Salata, 59, who was nominated global chairman of the Swedish buyout firm last month, said EQT is capitalizing on global investors’ quiet shift from US political turbulence toward Europe and Asia. From its base in Stockholm, EQT is wagering it can break the decades-long grip of the world’s biggest alternative asset managers.

“Being European, being Nordic in its roots and heritage, we have a good position globally in this new world order where we can be a little bit more neutral in the way we view things,” said Salata, EQT’s second-largest shareholder after the billionaire Wallenberg family. 

EQT may not be a household name but it’s grown to become the largest non-US private equity firm in the world, with $310 billion in assets. Operating under the shadows of rivals like KKR & Co. and Blackstone Inc., its total fundraising over the past five years is just shy of KKR’s, according to Private Equity International. 

The new Asia fund, BPEA IX, secured $600 million in fresh commitments from two major US pension funds over the last six months, a person familiar said. That’s in addition to $200 million from the New Jersey Pension Fund early this year. Repeat investors include the Teacher Retirement System of Texas and the Employees’ Retirement System of Rhode Island, the person said.

Under Salata and new Chief Executive Officer Per Franzen, EQT is now embarking on its next chapter, aiming to raise €100 billion ($116 billion) in the current fundraising cycle, while investing $650 billion globally in the next half decade. The firm has returned €25 billion to investors in the past 12 months, of which Asia has accounted for a sizable percentage. 

The buyout fund is riding a shift toward non-dollar assets, even while it targets infrastructure and real estate in the US, including data centers, student housing and medical offices, Franzen said.  

EQT’s pace of cash distributions has stood out amid a broader slowdown, as many private equity firms contend with weak payouts and prolonged fundraising challenges. It offloaded $9.3 billion of Galderma Group AG shares with other investors this year, the biggest single-year cash out by a private equity firm, eclipsing the London Stock Exchange Group Plc’s $8.2 billion sale in 2023, according to people involved in the sale.

In Asia, the asset manager generated $10.1 billion for investors from selling Nord Anglia Education Inc., among Asia’s top exits, bringing total distributions from the Asia fund and its co-investors to $16 billion in the past 12 months, Salata said. 

Asia will take center stage in EQT’s growth plans. Its merger with Baring Asia, founded by Salata in 1997, has opened a major gateway to the world’s fastest-growing markets. Regional deal flow has more than doubled, fueled by Japan, Korea and Australia, while India has remained consistently active, Salata said. EQT’s pipeline of deals is about $15 billion to $20 billion of “live opportunities,” he said.

BPEA’s two most recent funds - the 2018 and 2022 vintages - have delivered strong results, posting net internal rates of returns of around 20%, and achieved gross multiples on invested capital of 2.7 times and 1.3 times, respectively, according to US pension filings and company data. The newest Asia fund targets 25% gross returns and a 2.5 times multiple, according to the New Jersey pension plan. 

Breaking the grip of US giants in Asia won’t be easy. While it has completed $3.3 billion of exits this year, that trails KKR at $5.1 billion, including real estate divestment. In India, Blackstone has a two-decade head start and can write big checks quickly. EQT plans to increase its deal capacity in Japan severalfold to $5 billion, Salata said.

Despite the solid returns and robust fundraising, investors haven’t rewarded EQT in public markets as much as rivals. Its shares in Stockholm have gained about 11% annually over the past five years in US dollars, less than half the returns posted by KKR and Blackstone.

“We’re in this business for generations,” Franzen said, citing the Wallenberg family’s roughly 17% stake. “The mindset is not to maximize the share price in the next five to 10 years. It’s to win in the very long term.”

The promotion of Salata, a Chilean who will succeed co-founder Conni Jonsson, was part of the most significant leadership transition in years. Franzen, previously head of private capital for Europe and North America, replaced Christian Sinding in May. 

Salata’s success in Asia didn’t come easily, forged on scars from hype-driven bets and fizzled internet deals at Baring. His first push into India was a debacle: $360 million invested, five write-offs, with just one deal breaking even. The fallout was brutal. Baring partner Kosmo Kalliarekos was interrogated on the eve of his wedding in Greece, smeared in the press, and barred from returning to India for more than a year, according to his account on the firm’s website.

By 2002, recognizing the need for a reset, the entire team flew to Omaha, Nebraska to hear Warren Buffett and Charlie Munger reflect on discipline and value investing. They then holed up in a windowless Marriott hotel basement with only white boards. A dozen colleagues debated into the night, coining a mantra of “buying growth at a discount.” It marked a turning point away from spreading capital thinly across small, minority stakes.

India Setbacks

Salata and his team ripped up the playbook by focusing on larger, profitable companies and full-control deals. The firm’s fortunes turned with its $490 million third fund in 2005. BPEA made a $50 million investment in Chinese miner Hidili Industry International Development Ltd., and parlayed that into $604 million when it went public. By negotiating an early release in October 2007, just before the financial crisis, the firm locked in profits and shielded investors from the collapse that followed.

More recently, EQT’s winning Asia bets have been in healthcare, technology and education, sectors largely insulated from tariffs. Its domestically focused portfolio, from hospitals in India to schools in Hong Kong and Vietnam, further limits exposure to trade tensions.

By selling to EQT for $6.7 billion in cash plus shares, BPEA gained instant institutional heft and worldwide dealmaking access. The deal may also have been among Salata’s best: He emerged with a 10% stake worth about $4.3 billion.

Salata counts himself lucky to have found the Nordic firm, which shares his belief that every market is unique, especially in Asia. A one-size-fits-all approach rarely succeeds. 

“The cultural fit is a key reason why this deal has worked,” he said. “I’ve had discussions in the past with Americans firms, and it just wasn’t gelling for me.”

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