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Axiom Asia Private Capital closes fourth fund of funds at $1 billion

Singapore skyline
Singapore skyline

Axiom Asia Private Capital announced the final close of its fourth private equity fund of funds, Axiom Asia IV, at $1.03 billion.

The latest fund is slightly smaller than Axiom Asia III, which closed in March 2012 at $1.15 billion. The firm's first fund closed in 2007 at $440 million, while its second fund closed in 2010 at $950 million.

Axiom Asia's managing partners said in an interview that the environment now for the small- to medium-sized, Asia-focused general partners with which the firm invests dictated their decision to limit the fund's size to roughly $1 billion.

Over the past five years, the median size of the 1,000 or so institutional-quality general partners in Axiom's universe has declined to $300 million from between $400 million and $500 million, as the share of total flows claimed by bulge-bracket players continued to grow, said Marc Lau, one of four managing partners with the firm.

The math of the firm's strategy, which calls for making commitments of 10% to 20% of the funding of 20 to 25 GPs, dictated the fund's target size, Mr. Lau said.

Axiom, which looks to partner with GPs that won't compromise their ability to deliver strong returns by taking on too much money, is practicing what it preaches, added Alex Sao-Wei Lee, managing partner, in the same interview.

Fundraising for Axiom Asia IV began in the second half of 2015, and more than 30% of the fund has been committed already, Mr. Lee said.

The managing partners said Donald Trump's unexpected triumph in the Nov. 8 U.S. presidential election, which has sparked expectations of stronger global growth as well as concerns about a rise in protectionism, hasn't forced them to review an investment strategy that was focused already on domestic-driven growth opportunities in sectors such as consumption and health care.

Axiom has long focused on countries in Asia — such as China and India — that have large domestic economies, relatively resilient to fluctuations in global trade, Mr. Lau said.

One incremental change: Axiom's team is finding more opportunities now to co-invest alongside the GPs to which it makes commitments, so the fund's allocations to co-investments and secondaries could exceed the 20% level seen for previous funds, Mr. Lee said.

Mr. Lee said U.S. asset owners continued to account for the lion's share of commitments to the latest fund, followed by Europe, the Middle East and Asia.

U.S.-based funds announcing commitments to Axiom Asia IV include the $2.8 billion Nashville (Tenn.) & Davidson County Metropolitan Government Employee Benefit Trust Fund, which committed up to $60 million; the Michigan Department of Treasury's Bureau of Investments, which committed up to $50 million on behalf of the $55.7 billion Michigan Retirement Systems, East Lansing; and the $10 billion Montana Board of Investments, Helena, which committed $25 million.