Deals

Arch Capital targets $500m for second Asian fund

Arch Capital Management, the Hong Kong-based private equity real estate firm founded by ex-Citigroup and AIG executive Richard Yue and Philippines-based Ayala Corporation, has hit the fundraising trail for its second Asia opportunity fund.

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Hong Kong-based private equity real estate firm, Arch Capital Management, has launched its second pan-Asia opportunity fund with a capital raising target of $500 million, PERE can reveal.

The fundraising effort commenced shortly after Arch’s co-founder, the Philippines-based conglomerate Ayala Corporation, sold its 50 percent stake in the platform to New York-based The Rohatyn Group as part of a deal which saw it increase its stake in the US hedge fund manager. The other 50 percent of the business is owned by its other co-founder, the ex-Citigroup and AIG Global Real Estate executive Richard Yue.

Despite its exit, Ayala, now an indirect stakeholder in Arch, remains a key resource for the almost 30-strong platform and has committed seed capital of $50 million to the successor fund of its 2007, $330 million Arch Capital Asian Partners opportunity fund, to which it committed $75 million.

While the vehicle has a 60 percent investment ceiling on assets in China, Ayala’s strategic shift also means Arch Capital Asian Partners II can now invest up to 10 percent of its equity into the Philippines, something the previously direct ownership by Ayala influenced it not to pursue. The second fund also has a 20 percent cap on investments in Singapore.

A first closing is expected to happen over the next month. Initially, the firm will seek repeat investments from the 20-strong LP-base of Arch’s first fund, although the strategic investment by the Rohatyn Group is expected to enable the firm to gain access to a greater pool of investors, including sovereign wealth funds for the first time.

Investors in Arch’s first fund include pension funds, corporate investors and high net worth investors, predominantly from Europe and Asia. Arch is not understood to have appointed placement agents to assist in its capital raising effort.

The fund’s IRR target is between 18 percent and 20 percent in line with many other opportunity funds in Asia and a similar to its first fund, which is understood to be inline to hit its return targets, according to Yue.