Fund focus: Growtheum’s Southeast Asia breakthrough

Investment professionals on the payroll of sovereign wealth funds can go about their business free from the – sometimes existential – distractions of fundraising. That’s fine until they decide to spin out.

“When we started, we didn’t know any LPs. I had never previously interacted with an LP in my life,” said Amit Kunal, who spent a decade leading the Southeast Asia direct investment operation at Singapore’s GIC before striking out on his own in 2021 with the launch of Growtheum Capital Partners.

“Think about the market conditions in 2022-2023. You want a team member to go out there and pound the table, but it’s a new manager and a first-time fund. The only way an LP can get comfortable with you is by looking at what you’ve previously invested in.”

Growtheum recently closed its debut fund – which will make minority growth investments in Southeast Asia and very selectively in India – on USD 567m. It is the largest first-time private equity fund mainly focused on Southeast Asia, according to AVCJ Research. It is also one of just four to raise more than USD 500m in the past three years, a statistic that captures the challenging nature of the market.

Growtheum reached a first close of around USD 400m in early 2022, relying on commitments from corporates and high net worth individuals. They included Southeast Asian family groups that Kunal had invested in or alongside at GIC. The plan was to bring institutional investors into the final close, with a target of up to USD 750m appearing on memos written by LPs.

Even then, the firm received cautious industry feedback, much of it shaped by concerns about rising interest rates in the US, volatility in emerging markets, and corrections in listed technology stocks. Growtheum persevered, making several bold decisions along the way.

First, there was no placement agent. This was based on a resolve to minimise fee leakage and invest in the platform. Second, the team didn’t travel for fundraising. Singapore had reopened following the pandemic, so LPs were flying in regardless, but Growtheum’s wanted investors already familiar with the region. Third, the firm didn’t provide references to support due diligence efforts.

“We said, ‘You are only going to invest in our fund if you know Southeast Asia, so you must have networks here: other funds, bankers, lawyers, corporates. Go and talk to them,’” Kunal explained. “When it came to persuading people to spend more time learning about the fund, that confidence in letting the market be our reference rather than identifying people stood out.”

There are approximately 40 LPs, with sovereign wealth funds, pension funds, endowments, and development finance institutions (DFIs) among those represented.

The Growtheum team is now around 20-strong with a strong operational thread. In the beginning, it was just Kunal and his fellow partner Koon Po Choo, another GIC alumnus. Much of their track record from GIC is in the public domain and it was helpful in addressing two of the traditional bugbears regarding private equity in Southeast Asia: whether the market is deep enough and liquid enough.

When Kunal joined GIC, the direct portfolio in Southeast Asia comprised co-investments with GPs. By the time he left, the team had completed more than 25 solo deals. Some turned into lucrative exits: Metro Pacific Hospital Holdings is the largest trade sale in the Philippines and Monde Nissin is the country’s biggest PE-backed IPO; Bukalapak claims similar IPO honours in Indonesia.

Meanwhile, two sizeable Indonesia-based investments followed the first close on Fund I. Growtheum put USD 250m into digital lender Bank Allo and USD 75m into online grocery business Allo Fresh – with co-investors allocated USD 200m and USD 55m, respectively. Local conglomerate CT Corp was the common factor: it owns Bank Allo and it established Allo Fresh in conjunction with Bukapalak.

These deals enabled Growtheum to demonstrate that it could originate proprietary transactions, Kunal noted, but the lingering question was whether this held true beyond a network of known entities like CT Corp. An answer came with deals three and four: Vietnam-based International Dairy Products (IDP) and Indonesian hospital operator Mitra Plumbon Healthcare Group (MPHG).

“With MPHG, we created a deal in West Java similar in size to what you find out of Jakarta, and it was a family we haven’t worked with before,” said Kunal. "IDP is large in a Southeast Asian context and all the major players wanted to invest. The company went with us because it wasn’t just looking for capital, it wanted the value creation element. After that one, the fundraising accelerated.”

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• Topics
• Southeast Asia
• Growth
• Fundraising
• GPs
• LPs
• Singapore
• Growtheum Capital Partners
• Fundraising