Investors Lose Interest in Cambodia, Vietnam

THE WALL STREET JOURNAL

http://online.wsj.com

OCTOBER 1, 2009

(Post by CAAI News Media)

By ELLEN SHENG

In the private equity world, Cambodia just isn't what it used to be.

At one point in early 2008, fund managers were expecting to raise as much as $500 million for investment in the country. Instead, interest from investors evaporated with the financial crisis, forcing several funds to shut down or scale back.

Frontier Investment and Development Partners, which once hoped to launch a $250 million Cambodia fund, is struggling to find seed investors. Another, Cambodia Emerald postponed fundraising for their planned $100 million fund last year.

In total, Cambodia funds raised only $23 million in 2008, the Centre for Asia Private Equity Research, or APER, says. So far this year they've raised $5.6 million.

In neighboring Vietnam, once one of Asia's hottest investments, investors have also lost interest. Last month Indochina Capital Vietnam Holdings -- a prominent fund that invested in both listed and private companies -- was liquidated.

More broadly, Vietnam focused managers have raised no funds this year, according to APER data, a stark drop from the $1.6 billion raised in 2007. ¶ Naturally, deal making has declined. Dealogic tallies $20 million worth of private-equity investments in the two markets so far this year -- less than a third of the investments made the first nine months of 2008.

For those still in the game, the fundraising drought presents an opportunity. With fewer competitors sniffing around for investments, terms are better for buyers.

Managers say being smaller has its benefits, since most opportunities are in startups anyway. The majority of businesses in Vietnam are less than 8 years old.

Expectations for deal sizes have certainly changed. Leopard Cambodia, which has raised $28.6 million out of a planned $100 million, is now targeting investments between $1 million and $2 million. It once expected deals to be between $5 million and $15 million.

Leopard is among those that's resumed fundraising efforts. Another, Mekong Capital, a Vietnam-focused private equity firm, is raising a $150 million fund, its fourth.

But they're certainly not getting the reception they once might have. Investors are showing an increased appetite for risk, but few are willing to extend themselves as far as Cambodia just yet.

Write to Ellen Sheng at ellen.sheng@dowjones.com