Mekong targets $250m for fifth Vietnam fund

AVCJ understands that Mitsui Group, a longstanding LP, is set to re-up alongside a significant number of existing backers. The fundraise to date has been characterized by less dependence on LPs in Western markets and greater interest from new Asian investors, especially in Japan and Korea.

Japanese support is set to come from prominent life insurance, asset management, and financial services groups, including government-connected entities, while Korea participation will be more corporate in nature. A strong showing by existing and incoming family offices is also expected.

It more than doubles the size of Mekong's prior fund, which closed in 2016 at $112 million with contributions from the likes of Sarona Asset Management, UPMC Master Trust, and development finance institutions FMO and IFC. The GP closed its first fund at $18.5 million in 2003, with subsequent vintages raising $50 million and $64.1 million in 2006 and 2007, respectively. 

The latest fund, branded Mekong Enterprise Fund IV (MEF IV), will follow a similar strategy to its predecessors, with a strong focus on consumer sectors, especially retail, food and beverage, healthcare, education, and pharmaceuticals. MEF IV will make 10-12 transactions in a range of $8-30 million, slightly expanding the approach of previous funds. Investments will be primarily significant minority stakes of 40-45%, although there will be some scope for selective buyout activity.

Mekong's first three funds have been fully exited, with MEF II realizing a net return of 4.6x. MEF III has now been fully deployed, with recent investments including farm-to-table restaurant chain Pizza 4P's. There have been a number of recent exits from the broader portfolio, including Asia Chemical Corporation, which generated a gross return multiple of 2.6x and a gross IRR of 15.1%, as well as pharmaceuticals company Traphaco, which saw a gross return of 6.3x.

The standout deal to date is electronics and appliances retailer Mobile World, which was initially invested by MEF II in 2007 and secured an overall return of 57x across multiple partial exits. Upon the final exit last year, net proceeds from the investment were $199.4 million, while the net IRR was 61.1% in US dollar terms. The company, said to be the largest business of its kind in Vietnam, is considered an important factor in Mekong's growing visibility and integration into the local business sector.

Mekong's approach to value creation involves in-house functional teams comprised of two digital transformation specialists and four recruitment professionals who work across the portfolio. Team building is a key operational priority along with IT upgrades to ensure business decisions are data-driven. Other resources in these efforts include a "value optimization board" of industry experts who offer high-level advice.

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• Topics
• Southeast Asia
• Fundraising
• Growth
• Consumer
• GPs
• Vietnam
• Mekong Capital