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Asian pension funds miss out on private equity opportunities

US pension funds have invested heavily in a new Chase fund, but Asian pensions are conspicuous by their absence.

Ting Yu Seng, an International Finance Corporation (IFC) executive seconded to Chase Capital Partners Asia (CCPA), says the private lending arm of the World Bank is interested in Chase's Asia Opportunities Fund because it is good investment and it is helping Asia rise from the economic slump. In total, US pension funds have chipped in more than $200 million to the close-ended fund, which closed this week after raising $1.1 billion.

The names of these US pension funds are hard to come by because, other than being publicity-shy, fund trustees still don't like being seen investing in such risky investments as private equity. But at least they give it a try, which is, regrettably, more than one can say about Asian pension fund trustees - they still live in a largely government fixed-interest investment world.

As one hedge fund manager put it recently in Hong Kong, it's a chicken-and-egg question. Fund trustees say they follow pension consultants' advice. Pension consultants say they advise in accordance with the fund's investment guidelines. A channel for dialogue between the two groups to explore investment opportunities outside government bonds and fixed interest and equities is therefore rarely established.

Other than raising $100 million from the IFC, Chase Asia Opportunities Fund has also been able to attract $548 million from US pension funds and private investors, and $170 million from prominent Asian and US families. Chase itself has invested $282 million into the fund.

Andrew Liu, chief executive officer of CCPA, says the fund already has committed $330 million into six LBO (leveraged buyout) deals in Asia:

  • ASAT, an integrated circuit (IC) maker in Hong Kong, received $76 million from Chase;
  • Advanced Interconnect Technologies, an Indonesian IC maker, sold $28 million to Chase in notes and stocks;
  • TIW Asia, a new wireless telecom player in Asia, received $50 million;
  • Mando Corporation, a Korean auto component maker, received $117 million through an equity injection;
  • Verdaine Investments, a new company for the acquisition of oil palm plantations in Indonesia, accepted $26 million, and;
  • Tomen Mediacom, a broadband service provider in Japan, received $10 million.

Liu says the fund will invest on average $200 million-$300 million in the next three to five years in Asia.

Originally targeted at raising $750 million, the fund closed $350 million higher, making it the largest Asia-dedicated private fund in recent times. The fund aims to achieve a rate of return of 30% and has an exit strategy through an IPO.