Capital International targets $2.5bn for emerging markets

Limited partners who want to build exposure to emerging markets face the challenge this year of having to sort through a crowd of managers to find truly qualified GPs with solid experience and strong track records.

One of the longer standing market participants, Capital International Private Equity, will be among those looking for commitments.

The firm launched its Fund VI in December with a $2.5 billion target and $3.5 billion hard-cap, according to documents from the San Diego County Employees Retirement Association. The fund will make investments in emerging markets including Latin America, Asia and Eastern Europe.

Capital International declined to comment.

Capital International, which is a division of the global asset manager The Capital Group of Companies, has a strong track record dating back to its first fund in 1992.

Overall, its private equity arm has generated a total return multiple of 2.23x on realised investments and a 21.7 percent internal rate of return. Including all investments, the firm has produced a 1.63x multiple and a 19.9 percent IRR, according to information from SDCERA.

SDCERA is considering making a $50 million commitment to Fund VI, which is being placed by MVision Private Equity Advisers. The $8 billion pension is an existing LP in funds III and V.

For Fund VI, Capital International Private Equity will contribute at least 5 percent of total commitments to the fund, up to $100 million. The group is charging a 1.5 percent management fee during the five-year investment period, and then 1 percent of the invested cost of unrealised investments for the balance of the fund life.

The CIPE team will also use 100 percent of any deal fees to offset the management fee, according to pension documents from SDCERA.

Fund VI will continue Capital International Private Equity’s strategy from Fund V of investing in several emerging markets, including Brazil, China, South Korea, India and Eastern Europe and Russia. The group will also consider “select” transactions in the Middle East and Africa.

The firm makes growth investments in the $50 million to $300 million range and pursues “real-time opportunities across multiple regions and sectors rather than adhering to a pre-set allocation to particular geographies”, according to pension documents.

“[The GP] believes its agile strategy to be particularly vital in emerging markets, which tend to experience less predictable swings in investor sentiment and capital flows compared to developed markets,” pension investment staff wrote in a memo to the retirement board.

The private equity group was co-founded by Koenraad Foulon, senior managing partner, and Lam Nguyen-Phuong, senior managing partner. Koenraad was a managing director at Shearson Lehman Global Asset Management before joining Capital International in 1990. Nguyen-Phuong was a director at Ermgassen & Company, a London-based M&A advisor, before joining Capital International.