KV Asia closes debut SEA fund

Singapore-headquartered KV Asia Capital has closed its maiden vehicle on $263 million, beating its $250 million target, according to a company statement. The firm had raised the expected $250 million by July, but attracted some last minute investors taking it past its original target size. MVision Private Equity Advisers acted as the placement agent. 

The firm will focus on investments in Southeast Asia, primarily in the region’s most popular markets of Indonesia, Malaysia and Singapore. 

Karam Butalia, co-founder of KV Asia, told Private Equity International that a number of LPs were initially looking to invest in country funds, in particular in Indonesia-dedicated vehicles. 

“Indonesia was clearly very hot at the time we were in the market and we tried to counsel them against overdoing that [market]. In our experience, overconcentration in the Indonesian market doesn’t lead to the best returns, a pan-Southeast Asian [strategy] works better,” he explained. 

Although the fund is yet to make an investment, Butalia said that his firm's deal pipeline is strong. It has signed a number of term sheets across its core markets and is now prepared to invest as the currency depreciation in Indonesia and Malaysia has made it more attractive for US dollar funds to do deals.

KV Asia was co-founded by Butalia, a former Standard Chartered executive, and and ex-JPMorgan head of Southeast Asia private equity Vibhav Panandiker, who both launched the firm in 2010. It made a first close on the debut vehicle in October 2012, raising $100 million towards its target.

Prior to that, it had decreased its target from $500 million, and cancelled its mandate to invest in India, where the investment environment is difficult, PEI reported earlier. 

Niklas Amundsson, partner at MVision, told PEI that the fundraise, while successful, was not easy. “It is always challenging with first time funds, but at the end of the day quality will prevail. If you have a good team with a solid track record and exciting pipeline – those are things that investors tend to like.”

The investor base was unusual for a first-time vehicle, he added. The fund attracted US investment banks, European pension funds and endowments. Those LP commitments underscore the increasing investor preference for Southeast Asia exposure. The sub-region, as well as Korea and Japan, have become attractive to LPs seeking Asia exposure, Amundsson said.

However, despite heightened interest, some believe Southeast Asia has comparatively few quality fund managers. Head of Asia at fund of funds Auda International, Pak-Seng Lai, told PEI that the firm avoids geographical allocations so they aren’t obliged to invest where there aren’t enough experienced GPs, such as in Southeast Asia.