Funds & Investors – April 2009

Macquarie, Woori back $1bn South Korea fund * Bessemer adds $350m to Fund VII * DBS Private Equity establishes $100m China fund * Avigo raises $150m for India * Japanese bank buys stake in Alternative Investment Capital * Leapfrog reaches halfway to $100m target * Apax sells minority stake to GIC, Future Fund * ING's Australia-listed FoF sounds liquidity alarm * CDC commits $30m to microfinance

Macquarie, Woori back $1bn South Korea fund
Backed by the South Korean government, Macquarie Group and Woori Bank have agreed to raise a $1 billion fund, including $300 million from foreign investors, to invest in South Korea’s infrastructure and renewable energy sectors.

Up to $300 million is expected to be contributed by Macquarie and Macquarieled investors, while Woori Bank will commit $200 million, according to a statement from South Korea’s Ministry of Knowledge. The unlisted fund will begin fundraising in the third quarter and aims to close by 2012.

Macquarie has been actively raising infrastructure funds in other countries as well. In December 2008, it raised $630 million with the Abu Dhabi Commercial Bank for a joint GCC-focused infrastructure fund targeting $1 billion. In early 2008, Macquarie partnered with State Bank of India and the International Finance Corporation to raise a $2 billion fund focused on Indian infrastructure projects.

Headquartered in Seoul, Woori Bank is South Korea’s second largest commercial bank, according to its website. It was formed in 2002 through the merger of four banks.

Bessemer adds $350m to Fund VII
US-based Bessemer Venture Partners has raised an additional $350 million for Bessemer Venture Partners VII, a $1 billion fund that closed in June 2007.

“This supplement to our BVP VII fund will ensure that we can take advantage of future investment opportunities and that the companies within the Bessemer portfolio have continued access to capital,” Ed Colloton, chief operating officer of Bessemer, said in a statement.

When BVP VII was raised, the firm allocated $350 million from it toward investments in India.

In July 2008, Bessemer formed a fourperson advisory group for its Indian operations. Its investments in India include NetAmbit, a financial products distribution company; Tulip Telecom, a data communication services provider; and Venus Remedies, a pharmaceutical manufacturer. Since 2004, the firm has invested in 21 Indian companies and maintains a 14-strong team based in Mumbai.

Bessemer has invested in more than 130 start-ups globally and manages assets of more than $2 billion.

DBS Private Equity establishes $100m China fund
DBS Private Equity, the private equity arm of Singapore’s DBS Bank, has set up DBS Private Equity Enterprise, a $100 million fund to invest in unlisted companies in China.

Over the next two to three years, the fund will invest between $10 million and $20 million per deal for minority stakes in mid-to late-stage Chinese companies. It aims eventually to list the companies on the domestic A-share market, according to a statement from the bank.

DBS Private Equity has said it will aim to leverage its Asian banking network to help investee companies grow their businesses.

The firm will also open an office in Shanghai to help source deals alongside its offices in Singapore and Hong Kong, which cover the South and North Asia markets respectively.

DBS Private Equity has been investing in China since 2002, in companies such as Yingli Green Energy, Yangzijiang Shipbuilding and China Infrastructure Machinery. The firm typically provides capital and mezzanine debt financing to portfolio companies.

Headquartered in Singapore, DBS Bank is the largest bank in Southeast Asia by assets.

Avigo raises $150m for India
Avigo Capital, which makes growth capital investments in India, has raised $150 million for the first close of Avigo SME Fund III.

The fund is targeting commitments of $250 million and Achal Ghai, managing partner at Avigo, said that it is expected to close by the end of the second quarter this year.

Returning lead investors include the IFC, the private investment arm of the World Bank; UK government-backed fund of funds investor CDC Group; EDC, Canada’s export credit agency; Squadron Capital, a Hong Kong-based fund of funds manager ; and Australian Reward Investment Alliance, which was represented by Macquarie. New lead investors in the fund include PPM and New York-based fund of funds manager Siguler Guff, Ghai said.

The firm will maintain a similar investment strategy to that of its previous two funds. It will make investments in four core sectors including industrial manufacturing, industrial services, engineering and contracting, and infrastructure-related manufacturing and services.

Avigo SME Fund III will make investments of between $7 million and $10 million per deal, excluding follow-on investments.

The predecessor to this fund was a $125 million vehicle that closed in 2007. That fund is now about 80 percent invested across 11 deals, Ghai said.

Japanese bank buys stake in Alternative Investment Capital
Tokyo-based Sumitomo Mitsui Banking Corporation (SMBC) has bought a 20 percent stake for an undisclosed sum in Alternative Investment Capital (AI Capital), a Japanese private equity fund of funds manager.

AI Capital will leverage SMBC’s customer foundations and networks within Japan to source opportunities in private equity funds through its fund of funds vehicles and advisory services, the firm said.

The stake was acquired from trading company Mitsubishi Corporation, Daido Life Insurance and Mitsubishi UFJ Trust and Banking Corporation, the financial services company’s trust banking arm. The trio now respectively hold 51 percent, 25 percent and 4 percent in AI Capital. SMBC has also appointed a part-time director to the firm.

AI Capital is currently raising its second global fund of funds, AIC-PCG Global Private Equity Fund II, which is targeting between $200 million and $250 million, a spokeswoman said.

In 2004, it raised $152 million to invest in US and European funds. The firm presently manages another two Japan-focused fund of funds and has approximately ¥300 billion ($3 billion) in assets under management.

Leapfrog reaches halfway to $100m target
Leapfrog Investments, the first private equity firm to focus solely on investments in microinsurance, has reached the halfway mark on its debut fund. Investors committed to the fund so far include the European Investment Bank (EIB) and Dutch development finance company The Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO).

A $50 million first close for the fund is scheduled for mid-March.

UK-based Leapfrog partner Jim Roth said in an interview: “People have realised this is a big opportunity and many investors want to be the first in.” He added the relatively uncorrelated returns from microfinance investments were also proving attractive to institutions.

The fund will make between eight and 10 investments of $5 million to $10 million each in Asia and Africa. The microinsurance industry gives low-income people and businesses access to insurance products, typically in developing countries. The market for microinsurance is estimated at around 1 billion people, only 3 percent of whom currently have access to insurance, according to a report from specialist consultancy The Microinsurance Centre.

Logical targets for microinsurance investment are South Africa, India, Pakistan, Nigeria, Uganda, Kenya, Indonesia and the Philippines.

Leapfrog’s is the first vehicle to focus on this area.

Apax sells minority stake to GIC, Future Fund
Apax Partners has sold a stake of “around 10 percent” in its management company to Australia’s Future Fund and other investors, the Australian sovereign wealth fund said in a statement.

The firm has sold a 7.7 percent stake in its management company to GIC Special Investments, the private equity arm of the Government of Singapore Investment Corporation, and the Future Fund, the UK’s Financial Times reported. It is in talks to sell a stake of another 2.3 percent to a third investor.

The net proceeds from the stake sale are to be re-invested in a permanent capital vehicle in which the Future Fund will have a 10 percent stake, the Australian sovereign fund said. The objective of the permanent capital vehicle is to invest in Apax funds.

It added that none of the proceeds of the sale have been used to cash out any of the selling equity partners.

The relationship “gives the Future Fund access to the performance of the management company, existing and future Apax funds”, the Australian fund said.

Future Fund manages assets of about A$59.6 billion ($38.4 billion) as of 31 December 2008, of which about 1.8 percent is allocated to private equity.

ING’s Australia-listed FoF sounds liquidity alarm
Australia-listed fund of funds ING Private Equity Access Limited (ING PEAL) booked an A$8 million ($5 million) loss in the last half of 2008. ING said the vehicle has 109 percent exposure to private equity and – given a slowdown in realisations – doesn’t expect to be able to fund future capital calls with incoming distributions as it has done in the past.

It is currently reliant on a A$20 million credit facility to fund commitments, of which it had used $9 million by 31 December 2008. This debt facility expires in August, and ING PEAL will necessarily seek its roll over. It will also cease paying dividends and making new commitments to help fund capital calls.

Additionally, the fund of funds said it may sell some portions of its A$49 million in unfunded commitments and would also consider a share placement or rights issues to boost its liquidity. Some of these measures have been taken by various European listed funds of funds groups including SVG Capital and JPMorgan Private Equity.

CDC commits $30m to microfinance
UK government-backed fund of funds CDC has made two commitments totalling $30 million to microfinance funds. The commitments of $15 million each have been made to Catalyst Microfinance Investors and the India Financial Inclusion Fund.

Catalyst Microfinance Investors is a vehicle managed by Bangladeshi microfinance institution ASA and venture capital firm Sequoia in the UK and Netherlands. The fund will invest in greenfield microfinance institutions in countries including India, Pakistan, Nigeria and Ghana.

The India Financial Inclusion Fund is managed by Caspian Capital Partners, an independent microfinance adviser based in Hyderabad, India. The fund will focus on towns in rural India with low microfinance penetration.