Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
Saratoga is currently conducting a roadshow and aims to close the fund by the end of the year. Target investors are fund of funds, endowment funds, large financial institutions, multilaterals and private banks. Investors will be expected to lock in at least $5 million of capital for five years while the fund has an indicative life of 10 years.
Saratoga Capital was founded in 1998 by Edwin Soeryadjaya and Sandiaga S Uno. At the time, it managed the founders' money as well as money raised through an informal network of private investors. Now, Soeryadjaya and Uno want to build on their experience over the last decade having invested $430 million and achieved a weighted average IRR of about 40%.
Saratoga will invest in IndonesiaÆs infrastructure and natural resources sectors while also focussing on distressed buy-outs and opportunities to acquire controlling stakes in under-performing companies.
The partners believe their network of relationships will assist them to identify both the companies and the managers who can affect turnarounds. They are open to investing across Southeast Asia but expect, given their own competitive advantages and background, that investments in Indonesia will represent at least 50% of the fund.
Saratoga's minimum investment size will be $15 million but the partners believe their sweet spot for deals is in the $30-$50 million range. Thus, they expect the fund to make around 12 investments.
The founders of Saratoga bring a diverse mix of experience to the table. Soeryadjaya worked with conglomerate PT Astra International for 15 years. He left in 1993 to set up his own investment company. This fund was folded into Saratoga Capital in 1998 when Soeryadjaya and Uno got together.
The fund has hired two investment professionals to work on the fund: Kay Mock and Gavin Caudle. Mock was with the Government of Singapore Investment Corporation (GIC) from 1989 to 2006. He left as a senior vice president in charge of GICÆs private equity investments in Japan, Korea and Indonesia. Mock invested more then $1 billion across industries and geographies.
Caudle joins Saratoga from Citigroup where he headed investment banking for Indonesia. Caudle has more then a decadeÆs experience working in Indonesia.
The partners concede that the private equity space is very crowded but feel they are targetting a niche by focusing mainly on Indonesia. Soeryadjaya says, "The network of relationships which three of the partners bring to the table through years spent working in Indonesia at senior levels, is unparalleled."
Saratoga will use structured products, leverage and mezzanine debt to improve returns. Mock says the management team has an in-depth understanding of what financial products can work in Indonesia. "We have good relationships with investors, including a number of banks and wholesale investors, that are willing to invest in such products".
The partners are allaying investors' concerns about the value of the rupiah by saying they believe it has settled at a stable level. They also draw attention to the stable political environment and say the government is working hard to stamp out corruption.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains