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Asia watch, Feb. 26, 2007

Japan LPs to focus more on PE

Japanese investors are expected to increase their private equity allocations over the next two to five years, according to a study by Adveq, the Swiss private equity fund-of-funds.

The Adveq survey, which is considered the first analysis of the attitudes of investors in Japan towards private equity, revealed that more than one-fourth of Japanese institutions are already investing in private equity and that the majority of these firms only began doing so after 2000.

Among institutions already investing in private equity, only about 14% currently allocate more than 5% of total assets under management to this asset class. However, over the next two to five years the number of institutions allocating up to 5% will double to 28.6%, while those allocating up to 10% will increase from about 3% to nearly 9%, the survey found.

Of the three most common destinations of private equity investments—direct company investment, direct fund investment and fund-of-fund contributions—about two-thirds of investors currently opt for a direct fund investment. Although this is expected to remain the most common route in Japan for LPs, the figure is expected to drop to about 60% in the next two to five years, as fund-of-funds investments are anticipated to increase significantly from 16% to more than 21%, the survey found.

Adveq, together with Kyoto University, analyzed the investment behavior of Japanese company pension funds, industry association pension funds, insurance companies, banks, investment advisory companies, securities companies and other financial service providers.

Tokyo drug maker raises Series B

Regimmune Corp., a Tokyo–based drug developer, has raised $4.2 million in Series B funding. NIF SMBC Ventures led the deal, and was joined by Jafco Co., Orix Capital Corp., Yasuda Enterprise Development Co., New Business Investment Co., Mitsubishi UFJ Capital Co., Fund Creation Co. and return backer Japan Asia Investment Co.

The company develops drugs to treat allergies, autoimmune diseases and inflammatory disorders. The company has a U.S. subsidiary in Mountain View, Calif.

Citigroup plans $3.5B venture fund

Citigroup Inc.

plans to raise $3.5 billion for a fund to invest in companies in emerging markets such as India, China, Estonia and Chile, according to a report last week by Bloomberg.

The U.S. financial institution plans to commit $1 billion to the fund, called Citigroup Venture Capital International Growth Partnership II, and expects to raise the rest from employees and clients, according to Bloomberg. Dipak Rastogi, 52, who heads CVC International in London, will manage the fund, which will close later this year.

The bank launched CVC International in 2001 and it has invested $874 million, generating an internal rate of return of 29 percent. CVC International will charge an annual management fee of 1.5% during investors’ initial commitment to the fund.

New York firm opens China site

American Securities Capital Partners

, a New York-based middle-market private equity firm focused on North America, has opened a new office in Shanghai, China. The site will provide a base of support for ASCP portfolio companies with sourcing, supply chain optimization and access to Asian markets. The office will have five employees, and will be led by Jun “Jim” Tao, a former executive with General Electric.