Hot Hong Kong FoF easily beats target

Thanks in part to connections to two of the biggest names in private equity, newly launched Asia Alternatives was able to attract a marquee lineup of limited partners to raise $515 million for its its debut fund of funds.

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

With that lineup, the rookie FoF managed to snare commitments from such high-end LPs as the California Institute of Technology, California Public Employees’ Retirement System, Mass Mutual Asia, Mass Mutual Japan, Massachusetts Mutual Life Insurance Co., Ontario Municipal Employees Retirement System and the Pennsylvania State Employees’ Retirement System.

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

At $515 million, Asia Alternatives blew past its original target of $350 million and its hard cap of $450 million, Ma says.

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

Asia Alternatives has also backed mid-market buyout shop Japan Ireland Investment Partners, early stage investor Nexus Capital India Capital Partners, and NEA Indo-US Ventures, an India-focused venture fund launched recently by New Enterprise Associates.

Ma says the bulk of her firm’s investments will focus on Northern Asian countries and India, but the firm will consider funds targeting other parts of Southeast Asia and possibly Australia and New Zealand.

A former director at San Francisco-based private equity firm Hellman & Friedman, Ma co-founded Asia Alternatives in 2005 with Laure Wang, a former general partner at Asia-focused VC fund Pacific Venture Partners, and Rebecca Xu, who served previously as investment officer with the International Finance Corp., the private sector investment arm of the World Bank.

Ma says she and her co-founders went to school with or worked with many of the people at the funds they have backed. “You know how small the private equity community is in the United States? It’s even smaller in Asia,” she says.

While Asia Alternatives is one of only a few independent funds of funds focused on the Far East, Ma expects the asset class to grow as “it is still a very new segment of the market.” —Mark Cecil and Joanna Glasner