Boaml PE Team Spins out Newquest Capital Partners to Focus on Direct Secondaries in Asia Via Its $400 Million Fund

FUNDS [email protected] BoaML PE team spins out NewQuest Capital Partners to focus on direct secondaries in Asia via its $400 million fund AS WESTERN INVESTMENT BANKS COME Asia, we’re talking only about 10% and that’s cycle for some of the assets BoaML had held under increasing pressure to minimize their largely limited to the buy-out markets of Japan, in its portfolio for the past years. Massara risk – and have thus shed their alternative asset Korea and Australia. We think that it is largely notes that the "rm may announce its "rst exits investment units – Bank of America Merrill Lynch due to the fact that there are a limited number of in the coming months, and as well as new (BoaML) has taken a unique stance in the spin buyers focused on that part of the market” investments. o! of its private equity business, seeing its head Massara explains that the size of Asia’s un- “The fund currently has $400 million, of which professionals launch an independent, direct exited deal market is roughly US$150 billion. a signi"cant amount of that is dry powder for secondaries-focused "rm backed by the new investments,” says Jason Sambanju, region’s top LPs. Co-Head of Paul Capital Asia, NewQuest’s NewQuest Capital Partners, backed by cornerstone LP. “One way to tap into more a consortium consisting of Paul Capital, capital is thru NewQuest’s existing LPs. HarbourVest Partners, LGT Capital Partners So when the opportunity to increase the and Axiom Asia, has acquired “substantially fund size arises, we can easily step up to all” of BoaML’s non-real estate private put more money to work.” equity portfolio in Asia, launching the The BoaML-cum-NewQuest team $400 million NewQuest Asia Fund I, L.P., began discussions with Paul Capital, to manage the assets. NewQuest has HarbourVest, LGT and Axiom in early 2009, inherited more than 20 growth-equity when rumblings of change "rst surfaced. and buyout assets, primarily in Chinese The process of spinning o! the private and Indian companies, for an undisclosed equity unit was a long process, Massara value. Aside from these markets, the fund and Sambanju tell AVCJ, given that three will focus on regional opportunities in di!erent parties – the GP, the LPs and the Japan, Korea, Taiwan and Singapore. investment bank – each had to agree to The BoaML Asia private equity team terms. led Darren Massara as Managing Partner From the LP perspective, Sambanju will continue to manage the portfolio as says Paul Capital and the other LPs part of NewQuest Capital Partners. Team recognized the opportunities ahead of members Amit Gupta, Bonnie Lo and Min BoaML’s Darren Massara assumes the role of NewQuest’s them when signing onto NewQuest, Lin will all join as Partners. Managing Partner namely to scope out their own secondary targets backed by a reliable management A secondaries decision With an average deal size of approximately team. In the past, he adds, Paul Capital would While Asia has seen a handful of spin o!s by US$30 million, that translates to approximately “have to pass on opportunities” because captive private equity funds, NewQuest aims 5,000 un-exited positions in Asia today. “We very secondary portfolios up for grabs did not have to di!erentiate itself by focusing on direct conservatively estimate that investors which managers. “This is a signi"cant milestone,” secondary market targets – an area which hold these positions would seek to monetize at Sambanju says. NewQuest’s leaders says o!ers an unful"lled least 20% of their holdings today. This amounts Another anchor LP, HarbourVest, has niche in the region. to roughly 1,000 deals or about US$30 billion engaged in similar arrangements. In 2009, the “When you look at the traditional private of principal invested in Asia which we would "rm supported the Lehman Brothers Venture equity market in Asia, it’s very crowded with consider to be immediately actionable,” he adds. Partners’ management team spin o!, as well as the focus predominantly on providing primary In terms of sourcing, Massara points out that that of Phase4 Ventures, Nomura’s life science VC growth capital to companies through the there are other entities just like BoaML looking business, which had a signi"cant portion of its acquisition of minority stakes. There have been to o#oad their portfolios, such as hedge funds assets sold to HarbourVest. buy-out transactions, but they are less frequent looking to reduce their balance sheets, or “It’s very interesting for us because there’s compared to traditional growth capital private corporate and family o$ces looking to unload obviously been a lot of capital %owing into Asia equity deals.” Massara told AVCJ. current assets. the past few years, and the market place has “If you look at other regions of the world, become more competitive,” says David Atterbury, however, you "nd that the direct secondary part An LP state of mind Principal at HarbourVest. “With that we see a of the market – buying secondary shares rather Fundraising is not a priority for the time being future for NewQuest because it’s a "rst mover than primary shares, is much more robust. In given that the NewQuest Asia Fund I is currently looking at the direct secondaries market. It’s Europe, about 50% of all PE exits have been closed, given the funding contributed by four di!erentiated itself and will be looking at slightly exited to GPs or investors through secondary LPs. The vehicle will adhere to a traditional di!erent deals, and in terms of its strategy, sales. In the US it’s lower at about 30%, but in structure, aside from a slightly shortened life NewQuest’s is very viable.” Number 15 | Volume 24 | May 03 2011 | avcj.com 9.

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