ASIA NEWS: The Fudo five

If a speedy capital raising is the litmus test for an investment manager’s popularity among investors, CLSA Capital Partners should be feeling pretty confident after last month closing on another $155 million in equity for its third pan-Asia fund. A blended, gross IRR of 39 percent from the investments of the Hong Kong-based private equity real estate firm’s first two Fudo Capital funds goes a long way to explain why Fudo III has now collected $540 million in just five months.

Investigate for further reasons behind CLSA’s strong and consistent performance, however, and most likely you’ll hear compliments about real estate head and managing director John Pattar. He joined the firm in 2004 after seven years as chief investment officer at Australian developer-cum-fund manager Lend Lease. Since joining, he has turned its real estate division into one of Asia’s most widely-coveted businesses, as testified by the fact that Fudo I and II both were oversubscribed. Fudo I hauled $430 million in 2005 versus a $350 million target, and Fudo II collected $815 million in 2009 versus a $750 million target.

In fact, Pattar is so highly regarded by CLSA’s investors that, despite there being just two key men identified in the documentation of the first two Fudo funds, there was a further trigger clause demanded by certain larger limited partners. It stipulated that, should he leave, their commitments would be jeopardized.

This time things are different. PERE has learned that, while Pattar’s key man clause still exists, there is more of a shared burden. Following pressure from investors to have CLSA’s broader team assume greater responsibility, three extra key staff have been identified. The group now includes Pattar, chief financial officer Yeu Liong Chong, regional head of asset management Paul Gately, head of Japan Hirotaka Uchiyama and head of China and Taiwan Byron Zhao.

CLSA declined to comment, but one source familiar with the firm told PERE: “[The firm] has a really strong bench that people weren’t aware of, and that has been the single biggest change. The team has been broadened out, and now the investors want them as key men.” As a result of this key staff expansion, there now needs to be multiple departures for a key man event to be triggered and investor commitments to become jeopardized.

CLSA’s American and European investors already are becoming better acquainted with its five key staff as it is understood they have each played a role in the firm’s capital-raising campaign. After an extensive US tour, the next region on its itinerary is the Middle East and shortly Asian investors also will receive more attention.

The firm has 12 months from its first closing to wrap up fundraising. A final closing, however, is anticipated to happen well in advance of that, perhaps even before 2014 is over. With repeat investors making up the bulk of the commitments in the first two closings, the hard yards to entice new investors begins now. To that end, placement agent Greenhill & Co has been appointed to assist the effort.

Ultimately, CLSA has a fundraising target of $850 million and a hard cap of $1 billion for Fudo III. Following enviable returns for Fudos I and II and now with broader leadership in place, there are few betting against one, if not both, of those numbers being achieved.