FLAG Capital acquires Squadron

The $4.7bn fund of funds has acquired 100% of Hong Kong-based funds of funds Squadron Capital, which is currently targeting $400m for Fund III.

Connecticut-based fund of funds FLAG Capital Management has acquired Hong Kong-based peer Squadron Capital from owner Search Investment Group.

Financial terms of the transaction were not disclosed. By partnering with Squadron, which has $1.5 billion of assets under management, FLAG will bring its total assets from about $4.7 billion to more than $6 billion. The deal marks the first time FLAG has acquired another fund of funds in its 18-year history.

“Underscoring this [partnership] is a lot of conviction on both our parts that we are uniquely positioned – both FLAG and Squadron in Asia – to execute on a very particular set of opportunities…. and that is focusing on mid-sized country managers in private equity that are operating below the radar a bit but have a deep track record,” partner at FLAG Peter Denious told Private Equity International.

Squadron Capital manages Asian private equity funds on behalf of institutional investors, family offices and high net worth individuals from Asia, Europe, the Middle East and North America. The firm is currently investing its Squadron Asia Pacific Fund II, a generalist fund that closed on $400 million in August 2010, and is raising Squadron Asia Pacific Fund III, which has a target size of $400 million, according to data provider Private Equity Connect.

“Asian private equity is quite different from that of the US or Europe in the sense that it’s a really new industry in Asia,” chief executive officer of David Pierce told Private Equity International.” “Most of the funds are generalist [funds]. We do have some cleantech and some energy related and environmental funds. That’s still just getting going. Generally speaking in emerging Asia, sector specialisation is still at a very early stage.”

Squadron also manages the $150 million Keva Squadron Emerging Asia Fund I, a customised fund of funds vehicle created for The Finnish Local Government Pensions Institution in the Asia-Pacific region.

FLAG Capital was founded in 1994 and invests in venture capital, private equity and real assets. The firm is currently investing its FLAG Asia Partners III fund, a generalist fund that held a first close on $28 million and is targeting $125 million. FLAG also manages a global fund of funds and a North America-focused venture fund.