Mekong, Run by Ex-Templeton Manager, Revives Vietnam Fund Plan

Date: Monday, April 19, 2010
Author: Netty Ismail, Bloomberg

Mekong Capital, founded by a former Templeton Asset Management Ltd. portfolio manager, has revived efforts to raise money for its fourth Vietnam fund after halving the amount it was targeting.

The Ho Chi Minh City-based private-equity firm, which manages about $117 million, plans to raise $150 million for the Mekong Enterprise Fund III, said founder Chris Freund. It had sought $300 million for the fund in late 2008, he said.

The amount raised by private-equity funds focusing on emerging markets fell 66 percent to $22.6 billion in 2009, from a record $66.5 billion the previous year, according to the Washington-based Emerging Markets Private Equity Association. The fund-raising environment has since improved as global economies recover from the worst recession since World War II.

“The doors are open again,” Freund said in an interview in Singapore. “We have an opportunity to raise our fund.”

Mekong Capital slowed its fund-raising efforts last year as most investors refrained from making new commitments because of the global financial crisis, he said. Investors are considering putting money in Vietnam now and are visiting fund managers there, he said.

Vietnam’s economic growth accelerated to 5.83 percent in the first quarter from a year ago, buoyed by construction, tourism and banking services amid robust domestic demand. Foreign direct investment into the communist nation “should reflate” after declining during the crisis, Freund said.

Preferred Destination

A December survey by the American Chamber of Commerce in Shanghai showed Vietnam is a preferred destination for businesses looking to relocate from China, Asia’s biggest investment recipient. Santa Clara, California-based Intel Corp., the world’s biggest chipmaker, is scheduled to open a $1 billion testing facility in Ho Chi Minh City this year that will employ about 4,000 people.

Foreign firms have shown renewed interest to acquire one of the companies in which Mekong Capital has invested in, Freund said, declining to provide details.

“We had that back in 2006, and then it didn’t happen for years,” Freund, who previously worked with Mark Mobius at Templeton, said. “Foreign investors do want to deploy capital again in Vietnam.”

As the central bank raises interest rates to stem inflation and bolster the nation’s currency, Vietnamese companies are turning to private-equity funds for capital.

There are more deals available than funds to invest after Vietnam’s private-equity industry went through almost two years without new money coming in, said Andy Ho, head of investment at VinaCapital Group, a Ho Chi Minh City-based investment firm.

“The terms are much more attractive for private-equity investors today,” he said at an industry conference in Singapore last week.

Final Investment

Mekong Capital’s $55.5 million Mekong Enterprise Fund II plans to make its 10th and final investment soon, Freund said. The fund, set up in 2006, has had a net internal rate of return of 15.4 percent, according to the firm. Its investments include mobile-phone retailer Mobile World, whose revenue increased about 18 times from 2005 to 2008, and increased by another 35 percent last year, according to Mekong Capital’s Web site.

The firm’s new fund will invest in “fast-growing consumer- driven” businesses such as restaurants and retail firms, Freund said. It expects to invest $10 million to $15 million in each transaction, he said.

“There are some larger deals available, perhaps in the $25 million to $50 million range, but not many of them,” he said.

Freund set up Mekong Capital, Vietnam’s first private- equity firm, in 2001. He was based in Vietnam from 1995 to 1998 and in Singapore the next three years.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.