Eddie Wong, the one-time chief executive officer of China’s biggest private equity real estate fund, is back in the market. This time, however, his brief extends further than real estate.
Wong left Winnington Capital, the investment management business behind the $1 billion Trophy Property Development fund, back in 2011. Besides enduring the travails of that vehicle, which currently is being restructured following a falling out between Winnington, its limited partners and its development partner, Wong has spent his time formulating a new investment strategy for private capital in the region. That strategy will be executed by a start-up business based in Hong Kong called TransAsia Private Capital.
“I think there might be a niche in Asia for private equity,” Wong told PERE. “There are a few mega-funds of $2 billion and above, but anything $50 million and below they would find hard work.”
TransAsia, which Wong has launched alongside former Income Partners Asset Management partner Jiffriy Chandra, will target investments in China and Southeast Asia, predominantly in three sectors. Of primary focus will be consumer-related businesses, with resource- or commodities-related businesses also in the melting pot. Of secondary focus will be real estate.
According to Wong, there is limited competition for private equity investors for smaller consumer-driven businesses in the region. “It’s a market that used to be catered for by hedge funds, which had pockets for such ‘illiquids’,” he said. “Because of how the hedge fund universe has developed over the last few years, I believe they are not looking at this now.”
At press time, TransAsia already was assessing deals. One was a food and beverage chain with more than 20 locations, and another prospective deal was for a baby clothes retailer with 300 stores. Neither are start-ups, but both require capital to grow.
Despite his experience in real estate, Wong is less bullish on the prospects of stapling his new firm’s strategy purely to bricks and mortar. “There are a multitude of reasons why I came to this conclusion,” he said, adding that one of the main reasons stems from a belief that there is less interest from institutional investors in backing start-ups with a pure real estate focus.
Another reason for shying away from real estate is because Wong sees better comparable returns coming from private equity outlays. For example, one deal TransAsia is evaluating is projecting IRRs between 23 percent and 35 percent and an equity multiple between 2.1x and 2.8x – higher than what he is seeing in real estate currently.
The next step for Wong and his fledgling firm – there were six staff at press time – is securing capital. Indeed, TransAsia is in discussions with high-net-worth families in Hong Kong over $50 million of seed capital, although that may not be the only avenue.
TransAsia already is in the early stages of developing a fund, tentatively entitled TA Asian Consumers Capital Partners, the capital of which would be used for both consumer and real estate investments. The firm has not started marketing that fund yet, however, and is expected to complete transactions on a deal-by-deal basis first, with a view to offering prospective fund investors a taste of what they can expect from a commingled effort.
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