Funds & Investors – January 2008

Asia Alternatives goes large * China sovereign fund dampens foreign fears * Dubai's HBG nears $200m target * Ex-Temasek executives fundraising for China * First close for Sharia vehicle on $200m * Aureos backed by Kazakhstan FoF

Asia Alternatives goes large
Asia Alternatives, a Hong Kong-based fund of funds manager which raised $515 million for its debut fund this year, has kicked off fundraising for a second fund which sources expect to close on $1 billion. Officially, the target is $850 million. While the relatively new fund of funds manager with offices in San Francisco and Beijing only held a final close on its first fund this year, the firm, which was established by Melissa Ma, Laure Wang and Rebecca Xu, committed its first capital at the end of 2005. The all-female founding team attracted a number of LP heavyweights including CalPERS and Pennsylvania State Employees’ Retirement System. Oak Hill Investment Management, Warren Hellman and Arthur Rock are all investors as well as minority stakeholders of Asia Alternatives.

China sovereign fund dampens foreign fears
In a rare move, China’s vice minister of finance Li Yong revealed plans for the state’s new sovereign wealth fund, the $200 billion China Investment Corp, at the International Finance Forum in Beijing on Wednesday, according to China’s Xinhua news agency. One-third of the CIC, which is funded with a portion of China’s massive foreign currency reserves, will be used to buy Central Huijin, which controls most of China’s state-owned banks. One-third will be injected into the Agricultural Bank of China and the China Development Bank. The remainder will be invested in international financial markets. China officially launched the fund in September. Before this, the state had primarily invested its foreign currency reserves in US bonds. But China has been looking to move the reserves into higher-yielding asset classes. Li’s comments hinted at a desire to assuage overseas concerns that the new vehicle might embark on a buying spree of foreign companies. The CIC will not acquire overseas airlines, telecom or oil companies, Li reportedly said. He also said the CIC would make its financial investments in a “gradual and cautious way”.

Dubai‘s HBG nears $200m target
Dubai-based private equity firm HBG Holdings has held a second close on a $200 million fund which the firm expects will have a final close before the year ends. The fund will target mature businesses that require change or capital restructuring in the Middle East and South Asia region. HBG expects to invest the new fund over the next 18 to 24 months, during which time the firm will be looking to raise additional sector-focused funds. Zulfi Hydari, managing director of HBG Holdings said: “We are particularly delighted at the spread of investors from Saudi Arabia, Oman, Qatar, Bahrain and the UAE who have decided to invest.” Launched in February, the fund held a first close in June on $45 million.

Ex-Temasek executives fundraising for China
Former dealmakers from Singapore’s government investment company Temasek Holdings are seeking $750 million under Project FountainVest, a new independent operation led by Frank Tang, the former head of China investments for Temasek. Together with three other senior executives, Tang resigned from Temasek in September with the intention to establish an independent China-focused fund. “They are young and institutionally trained. I expect they will appeal to like-minded institutional investors,” a fund of funds manager said. Fundraising is understood to be “advancing nicely. They are getting their sponsors.” Temasek is believed to be quite supportive, sources say. Other founding members of FountainVest are Zhao Chenning, Terry Hu and George Chuang.

First close for Sharia vehicle on $200m
Aldar Private Equity Fund, a Shariacompliant direct investment and fund of funds vehicle targeting investments in the Middle East, North Africa and South Asia, has held a first close on $200 million. Backed by Bahrain’s Ithmaar Bank, Shamil Bank and the Islamic Investment Company, the fund is targeting $500 million and will make private equity investments as well as investments in other global alternative assets including real estate and “possibly” Sharia-compliant hedge funds, according to a statement. “This fund is one of many alternative asset and private equity funds that we will be rolling out in the coming months and years,” Ithmaar Bank chief executive Michael Lee said in a statement. Lee, who founded and managed the $730 million Islamic Development Bank Infrastructure Fund, is chairman of the fund’s investment committee. Mohammed Hussain, fellow investment committee member and Shamil Bank CEO, remarked: “One of the main objectives of the fund will be to invest in companies just before expected surges in revenues and profits. Investment opportunities in Asia are particularly attractive, given the recent economic performance in China and India.”

Aureos backed by Kazakhstan FoF
State-backed Kazakhstan fund of funds Kazyna Capital Management has made its first investment from a planned $1.5 billion fund, according to the firm’s chairman Abay Alpamysov. Alpamysov said the fund has $400 million from the government of Kazakhstan which it is aiming to commit within a year. The fund will have $1.5 billion to deploy over the next three years, he said. The government may commit even more funds over the next year dependent on the success of the initiative, he said. Alpamysov added: “Kazyna will attempt to stimulate private equity firms to fill the liquidity gap caused by problems in the banking sector.” The Kazakhstan banking sector has significant problems due to the lack of available loans from the global credit markets, because of this the government wants to stimulate private equity to provide growth capital. The fund has invested $10 million in SME specialist Aureos Capital’s first Central Asia Fund which had its initial close on $50 million, according to Aureos managing partner Talgat Kukenov. Aureos is looking to raise $100 million for a final close in June 2008 although Kukenov said this is not a hard cap.