Singaporean bank OCBC’s private equity unit has closed its debut fund at S$550 ($393 million) million, beating expectations despite the market tumult.

The strong investor appetite has pointed to investor expectations that a more difficult IPO market will open up opportunities for PE firms to step in.

Fundraising was launched in November last year, and was upsized from an initial target of S$400 million after reaching first close of S$300 million in March 2015.

The Lion-OCBC Capital Asia Fund marks the first time that OCBC Bank has created a fund for external investors. All of the previous PE investments made by the bank’s Mezzanine Capital Unit (MCU) have been made with capital from the bank.

OCBC Bank itself made a S$200 million commitment to the fund, with all of the upsized S$150 million allocated to external investors. MCU will also tap investment professionals from OCBC's asset management subsidiary - Lion Global Investors - to help manage the fund.

The fund close comes after a slow first half of the year for Asia PE amid low levels of interest in Asian PE funds among limited partners based outside the region.

The first half of this year saw 65% of Asia-based investors in private equity not making any new commitments to funds in the first half of this year, far higher than the figure for other regions, according to data provider Preqin. That slow pace of new allocations has left investors with capital to allocate to new fund launches.

“Investors in the fund are from across Asia,” said Daniel Kwan, head of MCU, including insurance companies, regional banks, sovereign wealth funds and high-net-worth individuals, including customers of subsidiary Bank of Singapore.

The Lion-OCBC Capital Asia Fund I is targeting a 20% internal rate of return (IRR) over the fund’s ten-year life and will invest in Singapore, Malaysia, Indonesia and China-based small and medium-sized companies (SMEs) operating in the agriculture, commodities and consumer sectors.

Those are markets that OCBC already has a significant banking presence in, giving it access to potential clients. Last year, the lender increased its stake in China’s Bank of Ningbo to 20% and bought Hong Kong’s Wing Hang Bank, for example. It operates under the OCBC Malaysia and OCBC NISP banners in Malaysia and Indonesia.

MCU has established a 12-year track record investing in 77 companies since the unit was established.

Kwan stated that “the 2009-2014 track record is more representative of the investment activities that the fund will undertake”. The last six years have seen MCU achieve a 20% IRR, up from 15% over the whole twelve-year period.

Kwan added that the most recent six-year period has seen “a more balanced mix of special opportunity deals and pre-IPO, growth capital deals”, pointing out that the latter typically fetch higher returns.

Market commentators expect the recent market turmoil to see companies delay previously planned IPOs, increasing demand for pre-IPO funding.