Asia Alternatives seeks $1.3bn for latest FoF

As much as 30% of the fund will be invested in secondaries and direct co-investments.

Minnesota State Board of Investment is set to commit $100 million to the latest offering of Asia Alternatives Management, its first investment in the San Francisco-headquartered fund of funds, according to an agenda item discussed by the pension on 31 May.

Asia Alternatives Capital Partners V (AACP V) is targeting $1.3 billion to invest primarily in Greater China, Japan, South Korea, India, South-East Asia, and Australia.

The firm will allocate as much as 30 percent to secondaries purchases of fund investments or direct co-investments with either the firm’s existing managers or those with “strong potential to provide future fund investments”.

As much as 85 percent of capital from AACP V will be invested in primaries.

Greater China investments will make up majority of the fund (45 percent to 60 percent); Japan and Korea, between 20 percent to 40 percent; India, 10 percent to 20 percent; and South-East Asia, the remaining 10 percent to 20 percent. Given the dynamic nature of Asia’s private equity landscape, the firm said these allocations may fluctuate as much as +/-10 percent during the life of the fund, which is pegged at 10 years.

The firm expects to invest in about 20 fund managers, 60 percent of which are from its core manager relationships, about 20 percent in first-time managers and the remaining amount in core primaries.

Asia Alternatives has backed funds managed by Chinese agri-focused firm Hosen Capital, North Asia-focused MBK Partners and Beijing-headquartered firm CDH Investments, PEI data shows.

The firm’s management fee is 1 percent of commitments, which will be reduced to 0.5 percent after the closing of a subsequent fund as well as the expiration of the commitment period. When the underlying investment has returned 85 percent or more of cost, no more management fee is charged on that investment, according to the terms of the limited partnership agreement for AACP V.

The firm also expects to make a GP commitment of up to 1.25 percent of the total capital raised.

Fund V is larger than its predecessor which closed on $948 million and has delivered a net internal rate of return of 10 percent and a return multiple of 1.1x, as of end-September 2016.

Limited partners in its fourth flagship vehicle include the Florida State Board of Administration, Teachers’ Retirement System of the State of Illinois and the San Francisco Employees’ Retirement System, according to PEI data.

Along with Asia Alternatives, MSBI is also looking to invest $200 million in Lexington Partners’ fifth co-investment vehicle and €150 million in Nordic Capital’s ninth buyout fund.