Asia Alternatives to make anchor bets on new managers

  • Minnesota commits $100 mln to new fund
  • Fund V charging LPs a 1 pct management fee
  • Asia Alts’ 2012 fund netting 15 pct IRR

Asia Alternatives returned to market with a new flagship fund-of-funds targeting $1.3 billion, part of which will be used to back new managers, Minnesota State Board of Investment documents show.

The fund, which received a $100 million commitment from Minnesota in May, will invest in new funds being raised by managers in China, Japan, South Korea, India, Southeast Asia and Australia. Minnesota’s commitment remains contingent on the outcome of final negotiations between the firm and Minnesota’s $85.3 billion pension and trust system.

As much as a quarter of Fund V will provide anchor commitments to new fund managers, a Minnesota memo says. The strategy, known as structured primaries, will enable Asia Alternatives to obtain favorable economics — typically lower fees, carried interest or superior alignment of interest-related terms — in exchange for backing a newer manager.

Fund V will charge limited partners a 1 percent management fee on committed capital through its investment period, or until a new fund is raised. Afterward, the fee falls to 0.5 percent. Investors will stop paying a management fee once the fund has returned 85 percent of its invested capital.

A little more than half Fund V’s capital will be used to back managers with which Asia Alternatives has existing relationships. A portion of the vehicle will be used to make co-investments or secondary fund investments, which will help the fund generate meaningful returns faster, according to Minnesota documents.

Asia Alternatives’s previous fund, which raised roughly $1 billion across several vehicles in 2015, was generating a 10 percent internal rate of return and 1.1x multiple through Sept. 30. Its 2012 vintage fund was netting a 15 percent IRR and 1.4x multiple as of that date.

Asia Alternatives has offices in Hong Kong, Beijing, Shanghai and San Francisco. The firm was co-founded by Melissa Ma, Laura Wang and Rebecca Xu in 2005. In addition to the co-founders, the firm’s leadership ranks include Managing Directors Praneet Garg, Jin Gu, William LaFayette, Valerie Leung and Akihiko Yasuda.

The firm did not respond to a request for comment.

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A Chinese junk sails at Hong Kong’s Victoria Harbour on Feb. 12, 2004. Photo courtesy Reuters/Kin Cheung