Paul Capital, a long-standing private equity secondaries firms, is winding down its Hong Kong-based Asia operation as part of a firm-wide consolidation.

This follows the collapse of merger negotiations with fellow PE secondaries firm Hamilton Lane, a struggle to reach the $2 billion target for its latest fund Paul Capital X, and lukewarm returns for Fund IX.

The firm's Hong Kong office, which has less than half a dozen staff, launched in 2007, claiming to be the first dedicated secondaries fund in Asia. Lucian Wu and Jason Sambanju, who co-head the regional office, could not be reached for comment.

Paul Capital offices in New York, London and São Paulo are also being wound down, leaving only its San Francisco headquarters. Some $300 million of Fund X’s open commitments will reportedly be returned to its investors. The firm runs about $6.7 billion in assets.

In 2011, Paul Capital was among the backers of the spinout of NewQuest Capital Partners – a Hong Kong-based direct secondaries firm – from Bank of America Merrill Lynch, alongside HarbourVest Partners, LGT Capital Partners and Axiom Asia.

The four backers were cornerstone investors in the $400 million NewQuest Asia Fund, which acquired BAML’s non-real estate PE portfolio in the region.

NewQuest declined to comment to AsianInvestor as to what will happen with Paul Capital’s investment.

Paul Capital's Fund X, which launched in 2012, had only raised about a quarter of its targeted capital, says a source, who noted that predecessor Fund IX – which closed in 2008 at $1.65 billion – had delivered middling returns.

“They’re not an outperformer in the market, and given that there are so many new secondary firms raising capital, it’s given investors more options to select from,” says the source. Despite its 22-year history and established name, “the track record wasn’t there”.

Indications that there might be problems at Paul Capital emerged more than a year ago.

Anne Pearce, who served as its business development manager, left in January 2013 after eight years with the firm. Her exit closely followed that of Paul Capital partner Richard Chow, who had been with the firm since 2007.

In mid-2013, a team of four at Paul Capital's New York office left to join US hedge fund Visium Asset Management. By November, reports surfaced that Hamilton Lane – which has  more than $28 billion in AUM and $141 billion under advisory – was in talks to acquire the firm.

Following the deal collapse early this year, Goldman Sachs Asset Management had reportedly engaged in merger talks with Paul Capital, but discussions did not progress beyond the preliminary stage.

There are no indications as to why the deal with Hamilton Lane fell through, with the firm declining to comment. However, industry executives point to the inherent difficulties in trying to merge large secondaries firms, which require approval from partners and investors.