PSERS re-ups as Orchid Asia seeks $750m for sixth China fund

The pension system, which had $51.4 billion in assets under management as of March 2014, approved the investment at a board meeting earlier this month. It committed $40 million to Orchid's previous fund, which closed at $650 million in 2011.

Orchid Asia VI will pursue investments in companies headquartered in China or with significant operational growth opportunities in the country. The primary remit is China with Taiwan and Hong Kong, but up to 25% of the corpus can be invested in other geographies, according to a PSERS presentation.

The private equity firm targets industries with high barriers to entry or leading companies with good growth prospects. It typically backs experienced executives with Western training who are operating China franchises similar to those that have been successful in the US. The consumer, healthcare, technology and outsourced manufacturing and services are of particular interest.

The fund will write equity checks of $5-50 million, rising to as much as $100 million in select cases.

Orchid's fifth fund had delivered a net multiple of 1.7x and a net IRR of 55.1% as of December 2013. It features two cornerstone investments in companies that went public in Hong Kong last year - watch maker Time Watch and food and beverage producer Tenwow International. Other recent deals include online games developers Linekong and FunPlus Game and cosmetics retailer Beauty Plus.

Late last year Orchid also saw a liquidity event for online automobile marketplace Autohome, which raised $133 million through a US IPO and is currently trading at close to twice its offering price. That investment came out of Fund III, a 2004 vintage vehicle that raised $181 million. As of year-end 2013, the net multiple was 3.1x and the net IRR was 21.6%.

Orchid Asia IV, which closed at $420 million in 2008, was on a net multiple of 1.5x and a net IRR or 12.9%.

The private equity firm has 19 investment professionals across offices in Beijing, Guangzhou, Hong Kong, Shanghai and Shenzhen.

As of March 2014, PSERS had 16.6% - or $8.4 billion - of its assets deployed in private equity, 2.6% in private debt and 1.8% in venture capital. A further 14% was in real estate. Its private markets program, which does not include real estate, had delivered a one-year return of 14% and a 10-year annualized return of 13.9%.

Last year the system committed capital to Morgan Stanley Private Equity Asia IV and CVC Capital Partners Asia Pacific Fund IV. According to its 2013 annual report, PSERS has also backed Bain Capital Asia Fund II, Baring Asia Private Equity Fund III, IV and V, Headland Private Equity Fund 6 and Navis Asia Fund V, as well as Orchid Asia V.

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• Topics
• Fundraising
• Greater China
• GPs
• Expansion
• Growth capital
• Orchid Asia Group Management
• Fundraising
• Pennsylvania Public School Employees’ Retirement System (PSERS)
• LPs