Asia pioneer

Emerging markets specialist Aureos Capital is continuing its march into new markets for Asian private equity, with the firm honing in on Bangladesh for its latest endeavour. By Judy Kuan.

Without a doubt, Asian private equity has attracted a great deal of capital and curiosity over recent years. In fact, with investors’ infatuation with the region, it can be difficult at times to keep in mind that Asia is as of yet a relatively new frontier for private equity.

Yet while LPs and GPs alike continue their onslaught of markets such as China, India, Japan and Korea, one group is keeping to its strategy of venturing ahead of the pack into pockets of Asia where private equity is still truly a nascent concept.

Weerasekera: leading the way into Bangladesh

That group is Aureos Capital, an emerging markets small- and medium-sized enterprise (SME) specialist. Since its formation in July 2001 to take over the management of SME funds sponsored by UK government-owned fund of funds CDC, Aureos has continued to solidify its reach into Central America, sub-Saharan Africa, South Asia and the Pacific Islands.

Over the course of 2006, much of the group’s efforts have centred on Asia. Most recently, Aureos chief executive Sivendran Vettivetpillai and Bangladesh’s Eastern Bank managing director/CEO Kazi Mahmood signed an agreement on Monday to set up a joint venture for creating Bangladesh’s first private equity fund.

“We have not set up the fund yet, but Eastern Bank and Aureos have agreed on a plan aimed at setting up the [f]und as soon as possible,” Aureos managing partner Nissanka Weerasekera told PEO via email. He added, “Unlike in India and Sri Lanka where Aureos already had a foothold through its management of CDC legacy funds, Bangladesh is a new market for Aureos and hence the decision to partner with a local institution.”

Weerasekera, the firm’s regional managing partner for South Asia who also heads up the Aureos South Asia Fund, is spearheading Aureos’ activities in Bangladesh. It is still early days for the Bangladesh fund, but according to Weerasekera, the group is contemplating a fund size of $15 million, with contributions by both Aureos and Eastern Bank.

Aureos already has a mandate to invest in Bangladesh via the Aureos South Asia Fund, which also targets India and Sri Lanka. The activities of the South Asia fund are run out of Aureos’ offices in Colombo in Sri Lanka – where Weerasekera is based – as well as Bangalore and Mumbai in India.

The Bangladesh initiative follows on the heels of Aureos’ other Asia-focused activities announced earlier this year, including the firm’s formation of three funds in the region. In addition to Bangladesh, another new frontier that the firm is looking into is Malaysia, where Aureos has been in discussions with local investors about launching a RM 250 million ($69 million; €54 million) fund targeting small- and medium-sized enterprises. In July, Aureos closed on the $91 million Aureos South East Asia Fund, which will invest in Thailand, Indonesia, the Philippines and Southeast Vietnam. Elsewhere in Asia, Aureos is also raising a fund to target Northeast China and another to invest in the Pacific Islands.

As Aureos’ investment activities continue to expand, so too has the firm’s ownership structure evolved, with Aureos’ management buying 26.5 percent of CDC’s and Norwegian development financial institution Norfund’s shares in the firm last month. One of the key changes is that FMO – the Dutch DFI – will now be a cornerstone investor alongside CDC and Norfund. Aureos has also snared the gaze of private investors who are interested in seeing a structure that “reinforce[s] the alignment of interests between management and investors in Aureos [f]unds”, Vettivetpillai said at the time of the announcement.

Whether other GPs and LPs will follow in Aureos’ wake is one matter, but going forward, emerging markets enthusiasts and novices alike are sure to note which new frontiers Aureos deems of interest.