LPs Shower $515M On Debut Asia FoF

Firm: Asia Alternatives

Fund: Asia Alternatives Capital Partners LP

Target: $350 million

Amount Raised: $515 million

Placement Agent: C.P. Eaton Partners

Law Firm: Pillsbury Winthrop Shaw Pittman LLP

Thanks in part to connections to two of the biggest names in private equity, the newly founded Asia Alternatives has tapped a marquee lineup of limited partners to raise its debut $515 million fund of funds, Asia Alternatives Capital Partners LP.

Asia Alternatives launched in early 2006 with three seed investors: Warren Hellman, founder of Hellman and Friedman; Arthur Rock, the venture capitalist known for being an early backer in Intel Corp. and Apple; and OHIM Asia Investors, an affiliate of Oak Hill Investment Management.

With that formidable backing, the firm snared commitments from high-end LPs including California Institute of Technology, California Public Employees’ Retirement System, Mass Mutual Asia, Mass Mutual Japan, Massachusetts Mutual Life Insurance Company, Ontario Municipal Employees Retirement System and Pennsylvania State Employees’ Retirement System. C.P. Eaton Partners placed the fund.

The firm, which has already committed an undisclosed amount to 10 general partners, will likely end up committing to about 10 more before depleting the capital from its oversubscribed fund. About 80 percent of the fund of funds is earmarked for growth equity and buyout funds, said Melissa Ma, a co-founder and managing director of the firm, which is based in Hong Kong and San Francisco.

Asia Alternatives plans to largely avoid multinational funds, opting instead for more local shops. So far, it has backed such indigenous firms as SAIF Partners, Hong Kong, which has raised its $1.1 billion SAIF Partners III, a growth fund; Hony Capital, Beijing, which closed a $580 million buyout fund, Hony Capital Fund III; and Capital Today, Shanghai, which has raised a $280 million growth vehicle, Capital Today China Growth Fund.

The firm has also backed Japan Ireland Investment Partners, a middle-market buyout fund; Nexus Capital India Capital Partners I, an early stage fund; and NEA Indo-US Ventures, also an India-focused venture fund. Those three funds have yet to close.

Many of the firms that Asia Alternatives is backing are led by a new generation of “returnees”—partners who cut their teeth working in the U.S. and European offices of investment banks and LBO shops. These firms feature “western training married with a local network and the ability to be perceived as local in each country,” Ma said.

Most firms backed by Asia Alternatives will invest in Northern Asia, which includes greater China (mainly growth capital), Japan (mainly buyouts) and Korea. The firm will also consider backing firms that invest in Southeast Asia, Australia and New Zealand. The 10 firms it has backed to date invest in a dozen countries. Ma said she wouldn’t be surprised to see more firms investing in Asia gradually migrate from growth capital to more of a mix of growth capital and buyout investing.

At $515 million, the firm blew past a hard cap of $450 million and an original target of $350 million, Ma said. This blistering fundraising pace would have been inconceivable three years ago, Ma added, when there was still “relatively limited interest in Asia.” Asia Alternatives has ten professionals in three offices, in Hong Kong, Beijing and San Francisco. The three founders are women: Ma, Laure Wang, and Rebecca Xu.

Ma said the she and her co-founders have often gone to school with or worked with people at the firms they have backed. “You know how small the private equity community is in the United States?” she said. “It’s even smaller in Asia.”—M.C.