Once Optimistic, Equity Firms Now Struggling

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
27 October 2009

In 2008, Cambodia’s economy was one of the fastest growing in Asia. Back then, at least three major private equity firms opened for business, hoping to raise hundreds of millions of dollars in capital for investment in agriculture, real estate, hydropower and others.

These days, however, these firms say they’ve had a hard time wooing investors made nervous by the global economic crisis.

“Now we have postponed our fundraising because of the general economic crisis,” said Brad Gordon, managing director of Cambodia Emerald, which had hoped to raise $100 million this year.

Gordon, who has gone from private equity to business consulting, said his firm may start raising funds next year.

Meanwhile, Frontier Investment and Development Partners, which expected to raise $200 million, has also seen little funding.

“The economic crisis resulted in investors pulling back from investing in emerging market countries,” said Mavin Yeo, a managing partner for Frontier. “In Asia, they only look at China and India, even that it is tough. The less developed countries have found struggle to raise money.”

Leopard Capital so far has been the only one of the three firms able to raise capital, though they are well below their planned $100 million for 2009.

Leopard has raised slightly more than $28 million from investors in Europe, the US and Asia, said Douglas Clayton, the company’s CEO. The firm hopes to see $30 million to $40 million by the end of the year, still 60 percent below target, he said.

“I can’t say that it is easy to raise money, but it’s possible,” Clayton said. “Even if we don’t get any more money, we’re OK, as we were the first fund to make some investments.”

Leopard has invested in a residential estate in Siem Reap, a rice plantation in Kampong Chhnang province and a wine factory and electricity supplier in Kampong Cham province.

Equity firms can help raise foreign investment, and the stunted take-offs of Cambodia’s first three have been a loss to the economy, said Ros Seilva, deputy director-general of the Ministry of Economy.

Many developed countries have high numbers of private equity firms, but for a country like Cambodia, weakness in the rule of law can make investors wary, said Chan Sophal, a researcher for the Cambodia Development Resource Institute.

In 2008, Cambodia was ranked 166th of 180 countries by Transparency International, making it the second-most corrupt country in Asia, ahead of Burma. A World Bank business report for 2010 ranks Cambodia’s business climate 145th of 183 countries; in Asia, only in Laos is it harder to do business.

Still, Chan Sophal said, in the next five years, private equity firms should see more confidence in investors.

Investors Lose Interest in Cambodia, Vietnam [-This spells big troubles for Cambodia]

SEPTEMBER 30, 2009
By ELLEN SHENG
The Wall Street Journal

In the private equity world, Cambodia just isn't what it used to be.

At one point in early 2008, fund managers were expecting to raise as much as $500 million for investment in the country. Instead, interest from investors evaporated with the financial crisis, forcing several funds to shut down or scale back.

Frontier Investment and Development Partners, which once hoped to launch a $250 million Cambodia fund, is struggling to find seed investors. Another, Cambodia Emerald postponed fundraising for their planned $100 million fund last year.

In total, Cambodia funds raised only $23 million in 2008, the Centre for Asia Private Equity Research, or APER, says. So far this year they've raised $5.6 million.

In neighboring Vietnam, once one of Asia's hottest investments, investors have also lost interest. Last month Indochina Capital Vietnam Holdings -- a prominent fund that invested in both listed and private companies -- was liquidated.

More broadly, Vietnam focused managers have raised no funds this year, according to APER data, a stark drop from the $1.6 billion raised in 2007. Naturally, deal making has declined. Dealogic tallies $20 million worth of private-equity investments in the two markets so far this year -- less than a third of the investments made the first nine months of 2008.

For those still in the game, the fundraising drought presents an opportunity. With fewer competitors sniffing around for investments, terms are better for buyers.

Managers say being smaller has its benefits, since most opportunities are in startups anyway. The majority of businesses in Vietnam are less than 8 years old.

Expectations for deal sizes have certainly changed. Leopard Cambodia, which has raised $28.6 million out of a planned $100 million, is now targeting investments between $1 million and $2 million. It once expected deals to be between $5 million and $15 million.

Leopard is among those that's resumed fundraising efforts. Another, Mekong Capital, a Vietnam-focused private equity firm, is raising a $150 million fund, its fourth.

But they're certainly not getting the reception they once might have. Investors are showing an increased appetite for risk, but few are willing to extend themselves as far as Cambodia just yet.

Write to Ellen Sheng at ellen.sheng@dowjones.com

[Private Equity[ Fundraising [for emerging market like Cambodia] slows after record year

EMERGING MARKETS: Many first-time private-equity funds sprang up in developing countries like India and China, which appear ‘less severely’ affected by the meltdown

Tuesday, Dec 23, 2008
BLOOMBERG

Private-equity investors raised a record US$63.5 billion this year to buy companies in the developing world, especially in Asia, even as the pace of fundraising slowed amid the global financial crisis.

Private-equity funds focusing on emerging markets raised 7 percent more money this year, compared with the year-on-year increase of 78 percent last year, the Washington-based Emerging Markets Private Equity Association said.

“We’re seeing a leveling off in growth after several years of very dramatic increases, but have yet to see a decrease in capital being raised,” Sarah Alexander, president of the industry group, said an e-mail to Bloomberg News.

Private-equity investors have pushed into new markets as credit dried up after the US subprime mortgage market collapsed, slowing deal-making in the US and Europe. Announced private-equity deals, excluding aborted transactions, shrank to US$207 billion worldwide this year, less than a third of the US$674 billion last year, data compiled by Bloomberg showed.

The funds focusing on Asia, excluding Australia, New Zealand and Japan, have raised US$37.1 billion since Jan. 1, accounting for 58 percent of total fundraising in emerging markets, said the industry group, whose members include private-equity fund managers and institutional investors.

Investors putting money in emerging-market funds “still have capital to commit in 2009,” Alexander said.

Investors see higher growth potential in developing markets, she said.

Funds that have come to the market in the last six months, particularly first-timers, will likely face a “much more challenging fundraising environment” amid the worst financial turmoil since the Great Depression, Alexander said.

“It’s reasonable to assume that the fundraising cycle will grow longer — potentially taking 18 months or more to achieve a final close on a fund,” she said.

Leopard Capital Ltd, which is targeting a US$100 million fund to invest in Cambodia by March 31, has raised only about a quarter of the amount this year.

“Next year, the world’s investment pie will be smaller and investors will be more discriminating on what fund strategies they back,” Phnom Penh-based Douglas Clayton said.

Many of the funds that managed to raise money in the second half of the year have already drawn commitments from investors “for some time” as they have been attempting to raise capital for at least a year, Alexander said.

Dhaka-based Asian Tiger Capital Partners, which aims to raise a US$50 million Bangladesh-focused private-equity fund, and Frontier Investment & Development Partners, which is seeking to raise US$250 million to invest in Cambodia, postponed their plans till next year.

Morgan Stanley Capital International’s Emerging Markets Index, a benchmark for equities in 24 developing nations, tumbled 53 percent this year.

Many of the first-time funds in emerging markets have sprung up in India and China, the world’s two fastest-growing major economies, and are seeking capital from local institutional investors that have been “less severely” affected by the global equity rout, Alexander said.

Actis Capital LLP, based in London, raised US$2.9 billion for an emerging markets private equity fund, which will allocate US$1 billion to India and US$600 million to China. New York-based Citigroup Inc said in May it raised US$500 million to invest in roads, ports and utilities in India.