(Bloomberg) -- PAG, Asia’s biggest manager of alternative assets, will close the fundraising for its latest buyout fund at $4 billion later this month, reaching less than half of its original target as investors balk at putting new cash into the region, people familiar with the matter said.

When the fund was launched two years ago, PAG was seeking about $9 billion. The firm told investors last year it anticipated raising $6 billion instead, after the world’s biggest pension pools became increasingly reluctant to invest in illiquid assets in general, the people said, asking not to be identified because the matter is private. 

PAG started marketing the fourth fund in the first quarter of 2022. At that time the industry was already facing challenges, with many firms extending fundraising periods as global investors grappled with a prolonged low level of exits by Asia asset managers. 

To PAG, raising $4 billion in the current market is no small feat, considering investors’ hesitancy to commit new funds amid high interest rates and geopolitical concerns, the people said.

While the private equity industry in general has struggled to raise new cash, PAG has been particularly impacted because it has refrained from putting a cap on how much it will invest in China. Rivals including Carlyle Group and TPG have been reducing the amount they earmark for China as concern has grown over its slowing economy and rising political tension.

The firm’s historically big relative exposure to China — which served it well in the past — has spooked some US pension funds. Investors from the Middle East and Asia contributed about half of the capital for the new fund, with US pensions showing a sharp decrease, one of the people said. PAG’s fourth Asia buyout fund will be smaller than its $6 billion predecessor from 2018.

A Hong Kong-based spokesman declined to comment.

Rivals who have shied away from China have seen better fundraising results. CVC Capital Partners Plc in February raised $6.8 billion for its sixth Asia fund, which was 50% bigger than its 2020 pool. The London-based firm had reduced its China exposure years ago and had been focusing Southeast Asia and other markets in the region.

TPG recently announced it had raised $5.3 billion in its eighth Asia buyout fund, with the new portfolio set to slash its China allocation by more than half, a person familiar said in March. The investment firm will allocate more than 80% in Australia, India and Southeast Asia — up from 70%, the person said. 

PAG’s optimism is stemming from attractive valuations in China, where it by far has the biggest team among regional and global players, and the increasing availability of financing onshore. 

The buyout firm will continue to focus on its four key buyout markets of Australia, China, India and Japan, targeting to return three times invested capital over five years, one of the people said. PAG has significantly expanded its non-China capabilities over the past eight years.   

PAG’s first fund, launched in 2012, achieved a multiple of 1.9 times, while its third fund returned 1.2 times, according to a September filing by California Public Employees’ Retirement System. The US pension fund committed a combined $480 million in the two funds. 

Overall, Asia-Pacific private equity assets under management dropped to 27% of global portfolios last year, a second year of decline following more than a decade of steady share growth, according to Bain & Co.  

Fundraising by Asia-focused investors declined to its lowest level in 10 years at $100 billion last year, as exits plunged, according to Bain & Co. Asset managers put dealmaking on hold amid concerns of economic growth, persistent high interest rates and geopolitical tensions, it said. 

The exit value in China fell 30% from its previous five-year average to $65 billion, the report said. 

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