Affinity Investment Group is a lesser-known private equity firm that stands out with its roots in the consulting industry, unlike most other PE firms originating from investment banks. Given the intensifying competition in the PE sector, value creation during ownership has become more pivotal to returns than valuation arbitrage between entry and exit multiples. Thus, it is crucial to study the investment practices of Affinity to design a scientific, systematic investment system.
Affinity was founded by ex-Bain Capital partners to focus on China market
Affinity Investment Group was founded in 2014 by several former partners from Bain Capital, including Zhu Linan, Wei Hopeman and Li Xiaojun. The firm is headquartered in Hong Kong with offices in Beijing, Shanghai and New York. It currently manages over $2 billion in assets focused on China’s new economy sectors such as consumer, healthcare and technology. The partners’ background with Bain Capital gives Affinity a strong heritage in operational value creation, portfolio management and realized returns in China. This differentiates Affinity from other China-focused firms and underpins its investor appeal globally.
Affinity leverages industry insights to source deals and drive value creation
Unlike most PE firms that source deals through extensive networks for traditional industries, Affinity leverages its consulting background and industry insights to identify opportunities in emerging sectors. The firm has invested in over 30 companies across consumer, TMT, healthcare, business services and financial services. Its hands-on approach to value creation also comes from the consulting DNA, working closely with management through operational changes and strategic initiatives. The operational edge allows Affinity to generate returns through fundamental improvements rather than financial engineering.
Affinity raises larger funds to focus on control buyouts
Affinity’s debut fund in 2014 was $158 million, followed by a $500 million second fund in 2016. The third fund in 2019 marked a major step up to $1.5 billion, reflecting the firm’s progressed track record. As the fund size increased, Affinity has shifted focus from minority stakes to control buyouts, allowing for greater influence over value creation. The larger equity checks also provide access to high-quality companies raising growth capital.
Strong China heritage underpins differentiated sourcing and value-add
Unlike global PE firms, Affinity’s partners have spent most of their careers in China which leads to unparalleled access and insights. Their local heritage enables a China-centric sourcing approach and a nuanced understanding of how to drive change in the unique Chinese environment. The firm’s deep on-the-ground presence across offices also allows hands-on involvement to support portfolio companies.
Affinity Investment Group has carved a niche in China’s private equity landscape with its consulting background and local heritage. Its differentiated approach to sourcing and value creation is well-suited for emerging sectors benefiting from rising consumption.