The Lion-OCBC Capital Asia Fund I is the first fund launched by Singapore’s OCBC Bank that includes external investor participation, OCBC Bank head of Mezzanine Capital Unit (MCU), Daniel Kwan, told Private Equity International.
The MCU is OCBC Bank’s proprietary private equity unit and will advise Lion Global Investors, the asset management subsidiary of OCBC Bank and the fund manager.
The S$550 million ($392 million; €349 million) fund that launched in November 2014 and closed in late August, saw strong demand from institutional and individual investors from across Asia, Kwan said. It initially targeted S$400 million.
These included insurance companies, regional banks and a sovereign wealth funds, while the individual investors included high net worth customers from Bank of Singapore, OCBC Bank’s private banking subsidiary.
OCBC Bank also committed S$200 million as a sponsor of the fund, Kwan said.
The fund will target high-growth SMEs, specifically within the consumer, commodities and agriculture sectors in its core markets of Singapore, Malaysia, Indonesia and China. These markets also overlap with that of OCBC Bank and the fund “will benefit from proprietary deal flow, said Kwan.
The aim is to make a total of about 15 to 20 investments of about S$20 million to S$60 million, with a holding period of about three years.
Kwan also explained that the fund will take minority stakes in the target companies, but will secure protective rights over major financial and strategic matters, including the right to appoint a director and/or observers to the boards of the companies.
In the 12 years since MCU’s inception it has invested in 77 companies and realised 59 of those investments, delivering an internal rate of return (IRR) of more than 15 percent. Over the past six years up to 2014, the portfolio return has IRR of more than 20%.
“While other banks may cherry-pick which investments to channel into their investment funds and which to retain as the banks’ proprietary investments, we have made it clear that moving forward, all of OCBC Bank’s private equity investments which meet the fund’s investment criteria will be made through the fund throughout its term,” Kwan noted.