Ashmore Closes On $1.3B Special Situations Fund

Firm: Ashmore Investment Management

Fund: Global Special Situations Fund 3

Amount Raised: $1.3 billion

There’s been a rush to gain access to the less efficient markets, which has translated into a lot of activity for distressed groups and emerging market funds. Ashmore Investment Management is trying to capitalize on both trends with its latest vehicle, and closed on $1.3 billion for its new fund, Global Special Situations Fund 3 (GSSF3).

London-based Ashmore announced that it closed on the $1.3 billion after approaching existing investors over the summer, and the firm may still accept commitments from investors unable to commit in earlier closings.

The fund has a traditional private equity structure, a seven-year life and a re-investment period of three years. Its focus on special situations includes distressed emerging market companies that require financial restructuring. The fund will make investments involving distressed sellers through private equity deals, and will participate on the debt side of deals as well. Geographically, the firm will remain agnostic, but is expecting to see a lot of activity in China and India as well as Russia and Brazil.

Ashmore Managing Director Jerome Booth said he expects the first capital calls to follow very shortly and that the entire fund may be fully invested by the end of 2007. A large part of the fund could be invested before the end of this year, Booth said, noting that Ashmore has seen an intense amount of deal flow that necessitated the quick raise of capital.

Booth credits Ashmore’s long-term involvement in emerging markets—the firm’s first such investment was in 1983—for putting it in the position to succeed today. “In emerging markets, it’s about building relationships over a long period of time,” said Booth. “You don’t get deal flow by sitting in an office and waiting for a broker to call or arriving on an airplane and shouting to the world that you’re there.”

He added that interest from institutional investors is the driving force for change in emerging markets. “The big change for emerging markets generally is institutional investors understanding this and we’re going to see more and more money coming into different things,” Booth says.

Limited partners of Ashmore include many large state pension funds. The Pennsylvania State Employees Retirement System (SERS) selected Ashmore to invest a $350 million emerging market debt and local currency allocation. San Francisco Employees’ Retirement System and SEI Investments also approved emerging market equity mandates for Ashmore this year.

Recent U.S. public pensions that have signed on for Ashmore’s emerging market debt fund include the City of Fort Worth Employees Retirement Fund, which committed $100 million; the Shelby County Retirement System, Firefighters Retirement System of Louisiana and the San Antonio Police & Fire Pension Fund, which each approved $25 million. Recent mandates Ashmore received for local currency investments include the Houston Police Officers’ Pensions System and the Firefighters Retirement System of Louisiana.

Emerging markets have been attracting investors consistently. The Emerging Markets Private Equity Association (EMPEA) estimates that emerging market private equity managers raised $21 billion last year, with Asia leading the way with $15.4 billion, more than triple the amount for 2004. The EMPEA survey of limited partner interest in emerging markets found that 75% of those polled are investing in emerging markets funds. In the survey, 64% of respondents expected to increase their commitments to emerging markets over the next five years. —M.S.