Cube Capital, the London and Hong Kong-based hedge fund manager, has drawn up plans for its first private equity real estate fund with a focus on investing opportunistically in Myanmar, Mongolia and Vietnam.
The firm announced today it is plotting to raise $150 million for its Cube Asia Frontier Fund (CAFF), a vehicle planned to last up to eight years through which it hopes to generate a 25 percent-plus IRR from its investments.
Cube’s plans present something of an evolution for the firm which has built up assets under management of approximately $1.3 billion predominantly from investments via its multi and single manager hedge funds. Its real estate holdings are comparatively smaller with projects under management valued at $250 million. These investments were accumulated through club deals and co-investments.
Given the size of CAFF and Cube’s frontier markets investing strategy, the firm is not thought to be targeting capital from large institutional investors but smaller groups such as fund of funds and family offices. Most of these are expected to come from Europe and the Middle East.
Describing the three countries as having “inefficient frontier markets”, Cube said the equity from CAFF would be invested in development and distressed situations which it said were “abundant”.
Cube said the countries offered strong growth potential on the back of favourable political changes, liberalisation, favourable regional demographics and a lack of a developed credit markets. That said, despite limited available credit, Cube itself is only planning to use “limited leverage” for its investments, a spokeswoman told sister publication PERE.
The firm added that, when it deemed circumstances to be advantageous, it would extend its frontier market investing strategy into other markets.
Thomas Holland, Cube’s head of Asia and chief investment officer for the fund said the firm was close to closing on one of the fund’s first investments. He said: “Our philosophy is to seek uncrowded investment opportunities, and we are confident that exploiting these still insufficiently explored markets will generate attractive returns. It will also make us one of the first entrants into nascent real estate investment markets such as Myanmar.”