Dutch private-equity fund-of-funds firm AlpInvest Partners has set up a secondary-investments team in Hong Kong and will allocate 10-20% of its €1 billion in annual secondary PE investments to Asia and other emerging markets.
Neal Costello has moved from AlpInvest’s New York office to run the Asia secondaries team. He will be joined by Nicole Ying Su from the secondaries team in Amsterdam. They will join the existing primary fund and co-investment teams in Hong Kong.
Costello originally joined the firm's secondaries team in New York in 2003, before which he was with CIBC World Markets’ mergers and acquisitions division.
AlpInvest has been buying secondaries for 11 years and has invested $7.5 billion globally over five funds and 70 transactions, including more than 10 transactions in Asia-Pacific. It has relationships with 250 PE firms globally, of which over 30 are in Asia; has invested in region since the late 1990s; and set up the Hong Kong office in early 2007.
Costello and Ying Su will join an existing seven-strong investment team in Hong Kong, which covers funds of funds and co-investments. The team will expand as investment opportunities grow, says Wouter Moerel, co-head of AlpInvest Partners’ secondary-investment business.
Costello retains his title of principal and Ying Su hers of associate. She is a Chinese national, while Costello has not worked on the ground in Asia, but has been involved with several of the Asian transactions the firm has done.
The firm felt the most important thing was to have a senior executive in place who understood AlpInvest’s investment process and had a lot of secondaries-investment experience, says Amsterdam-based Moerel.
Globally, AlpInvest’s investment team is 65-strong, of which nine are in Asia now, and 28 each in Amsterdam and New York respectively. Of the 65, there are 22 secondary-investment executives; two in Hong Kong, nine in Amsterdam and 11 in New York. Twenty of the 65 are focused on co-investments.
AlpInvest started by investing through local teams in funds of funds and co-investments in Asia, and feels that now it should have an on-the-ground secondaries presence in the region.
“Only now do we think the Asian market is mature enough to provide the type of assets and deal flow we're looking for in terms of asset quality, value creation and liquidity potential,” says Moerel. “There are now sufficient sellers in the region that have been investing in private equity for five to 10 years and are looking to sell.”
It is also possible now to find Asian funds for sale that have a demonstrated track record and which AlpInvest has been able to track for seven to 15 years, he adds. These are held by European, US or local investors.
The firm invests an average of €1 billion a year globally into secondaries and has bought more than $400 million of funds with dedicated Asia strategies. It has also bought non-Asia funds from Asian sellers.
In terms of individual deal size, AlpInvest secondary transactions range from $10 million up to $700 million–800 million, notes Moerel. “We invest in eight to 15 transactions a year, so average deal size is €50 million–80 million.”
AlpInvest's secondary funds have a lifespan of 10 years with a three-year investment period, he says, and they have typically returned capital within four to six years of inception.
In terms of investment sectors or geographies, Moerel declined to be specific. “We are trying to build diversification, so are generally sector-agnostic.” He adds that the firm has bought several well-known Asian names.
Volkert Doeksen, chairman and CEO of AlpInvest, sounds an equally bullish note. “Asia has always been an important market for AlpInvest," he says. "As an early private-equity investor in the region, we expect our activities to continue to grow in Asia.”
The firm certainly boasts big Asian clients, if Doeksen’s presence at China Investment Corporation’s March 2010 investment conference – alongside numerous luminaries of the alternatives industry – is any indicator.