Axiom closes Fund II ahead on $950 million

The firm’s second fund, Axiom Asia Private Capital Fund II, has closed on $950 million – well over its $750 million target and over double the size of its debut fund, the $440 million Axiom Asia Private Capital Fund I.

“We basically have been raising this over the period of the global recession,” Chihtsung Lam, founding Managing Director at Axiom, told AVCJ. We had a target at $750 million, a hard cap at $950 million; we have ended up at about $250 million over our hard cap in terms of subscriptions and hard indications of interest.”

Interest – expressed and explained

Total firm indications of interest in the fundraising, supported by placement agent Probitas Partners, apparently exceeded $1.1 billion. Furthermore, some $400 million of the commitments to Fund II came from new investors, while 98% of investors from Fund I stayed on into Fund II.

Discussing the factors behind the success of the fundraising in the current climate, Yew Hong Goh, fellow founding MD at Axiom, said “It’s a combination of a few things. Investors continue to have a positive view of the Asian private equity market … The team, with over 70 years of combined private equity experience, we count as a key attraction.”

Five out of ten investment principals at Axiom are former colleagues from GIC Special Investments in Singapore, while Alex Sao-Wei Lee recently joined from Coller Capital as Investment Director and Head of Secondary Investments and Olivia Tan from McKinsey & Co as VP.

Goh also pointed to Axiom’s track record so far as a plus in the raising. “We have been very careful about building up a relatively diversified portfolio of funds in our Fund 1, which has actually stood up pretty well.”

Axiom’s LPS were ready to give their own account of their views on the new fund. “We believe this is an interesting time to be increasing our exposure to this dynamic region, and Axiom has proven to have differentiated insight and diligence capabilities in their fund selection efforts,” Christy Richardson, Director of Private Equity at the William & Flora Hewlett Foundation, a $6.29 billion charitable endowment and LP based in Menlo Park, California, told AVCJ.

Other sources pointed to the key differentiating value of being able to access, and assess, proven growth capital and late-stage VC funds across Asia, as opposed to the pan-Asian buyout space, where some LPs apparently feel access and evaluation has become too commoditized. Axiom, in contrast, has proven its capacity to reach less well-known groups, and often to diligence them on less formal criteria, frequently through direct access to investee companies, in ways that support solid long-term views on performance, sources indicated.

According to Lam, around 98% of LPs from Fund I re-upped into the new fund, but a considerable number of new LPs also came on board. “Our LP base is about two thirds US; Europe is about one quarter. The rest comes from Asia, Middle East and Latin America,” he told AVCJ. “About three quarters is institutional. The largest groups are endowments and foundations; then we have pension funds and insurance companies.”

Success and strategy

Axiom is not positioned to get direct information on overall fund of funds performance in Asia, but its strategy appears to have been comparatively effective. “What we have heard from our LPs who have invested in f-o-fs is that we performed pretty well,” Goh told AVCJ. And despite the firm’s highly diversified investment platform, across subsectors of the asset classes and countries, “Axiom’s focus from its inception has always been somewhat on mid-market country funds,” Goh continued, citing the importance of market inefficiency in allowing some firms to gain privileged access and outperform. “Inefficiency is most found in the smaller funds, typically in $500 million or below. These are typically country funds.”

Axiom’s materials specify that the new fund will seek to invest up to $100 million each into funds across various strategies in Asia Pacific, from early stage venture to buyout, covering almost all national markets in the region. Also, the new fund has some capacity to invest in secondary interest and to co-invest alongside its GPs.

“We are actually targeting roughly $200 million into secondary investments over the next 18-24 months,” Alex Lee told AVCJ. “Naturally, we’re looking to purchase secondary positions in Asian funds, and we have the ability to invest in highly funded as well as unfunded positions.”

Lam notes that, despite the firm’s success, the overall fundraising market is still challenging, with the denominator effect and other inhibiting factors still offsetting the appeal of Asia to global investors. In this still-difficult environment, LPs appear to be placing larger bets with fewer firms. “The overall market is still fairly lukewarm,” he told AVCJ. “That flight to quality aspect is still fairly accentuated.”

Axiom, meanwhile, will probably enlarge its own commitments to its chosen managers rather than seek many new ones. “We have been targeting the top tier from the start,” Lam emphasized.

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• Topics
• Fundraising
• Fund-of-funds
• Southeast Asia
• Performance
• Coller Capital
• Yew Hong Goh
• Chihtsung Lam
• Axiom Asia Private Capital
• GIC Special Investments