Anyone looking for an example of how institutional investors familiar with one another prefer to invest together should look no further than the capital haul managed by Singapore-based Alpha Investment Partners this summer.
The $1.65 billion final closing for its Alpha Asia Macro Trends Fund II happened largely thanks to its early investors granting an extension of the capital-raising period so other new investors also could commit capital.
Asia Macro Trends Fund II was launched in the summer of 2011, and Alpha held a $460 million first closing for the value-added vehicle that September. The original target was $1 billion, similar to the $1.18 billion raised for the first fund in the series in 2008. By December 2012, Alpha had reached its target and was preparing to hold its final closing that month when a number of the fund’s investors approached the firm asking to make introductions to other investors they knew wanted Asia exposure but had not yet taken the plunge.
Included in the $650 million of extra commitments are a number of European investors that had never committed capital to Asia before. According to Christina Tan, managing director at Alpha, those investors were made comfortable by the notion of investing with some of their peers. It became one of those unusual circumstances where they needed the capital-raising period extended to allow for extra due diligence on the firm and its fund offering, she noted.
Extending the fundraising period meant approaching all of the fund’s investors to ask for another six months, which they were perfectly happy to grant, Tan said, explaining that they recognized a larger kitty actually would boast the fund’s chances of success in taking down a wider array of value-added opportunities. “Our investors were supportive as they recognized that the scale of the opportunity required a large enough fund to take advantage of it,” Tan told PERE. “A small fund would have meant a less diversified asset base.”
Ultimately, 70 percent of the capital came from 11 existing investors, and 30 percent came from six investors new to the firm. Half of the investors are from Europe, including several Dutch pension plans, while one quarter are from the US and one quarter are from Asia. “We have a relatively small investor base of 17 investors with some very well-known names coming in (at a later stage),” Tan adds. “This made the existing first close investors comfortable about having additional investors.”
The end result was the largest capital haul for Asia since the start of the financial crisis, matching the ¥130 billion raised by Fortress Investment Group for its second Japan-focused fund last year. With a 60 percent leverage target, Asia Macro Trends Fund II has an investment capacity of $4 billion. That capital is expected to be deployed across Asia, primarily in developed markets like Singapore, Hong Kong, Taiwan, Korea and Japan, although China and India also are likely to figure. Like its predecessor vehicle, the new fund is expected to generate mid-teen IRRs and a 1.8x equity multiple.