4 Equity Funds Eyeing $450M In Investments

Four new private equity funds, backed by brand-name overseas investors, are aiming to bring more than $450 million of foreign investment into Cambodia.

Jim Rogers, who forecast the commodities boom in the late 1990s and in 1970 founded the successful Quantum fund with George Soros, and contrarian fund manager and investment adviser Marc Faber, who predicted an Asian downturn on the eve of the 1997 financial crisis, are on the advisory board of the Cam­bodia In­vestment and Develop­ment Fund, a $250 million private equity fund that plans to launch this month.

“Vietnam worked out well,” Faber said by phone from Swit­zerland on Wednesday.

“I think the same may happen to Cambodia,” he said.

“After 20 horrible years, the country is now poised to experience a phase of relatively strong economic growth,” he said.

He’s not the only one who thinks so.

South Korea’s Tong Yang investment bank hopes to seal a deal with a Cambodian IT company by year’s end, as part of a $50 million Cam­bodia-Vietnam fund.

Leopard Cambodia Fund, helmed by Douglas Clayton, former director of Knight Asia Group and chief of the Thailand office of CLSA Securities, launched in April, with the hope of raising $100 million.

Faber is also on the board of Leopard Capital, the parent of Leopard Cambodia Fund, as are Heinrich Looser, retired chief of private banking at Bank Julius Baer in Zurich, and Jim Walker, former director and chief economist of CLSA.

Cambodia Emerald split from Leopard in November and aims to raise $100 million to invest in Cambodia.

Peter Brimble, who directs Emerald with Bradley Gordon, a former corporate lawyer, said investors in Vietnam “are running out of things to do.”

Emerald, Leopard and CIDF plan to invest across the spectrum—in Cambodian tourism, agro-business, infrastructure, real estate, financial services, telecommunications, oil and gas and manufacturing, among other areas.

Marvin Yeo quit his job as a syndicate manager at the Asian Development Bank after four years to join Singaporean economist Kim Song Tan in founding Frontier Investment & De­velopment Part­ners, which runs CIDF.

Yeo said Cambodia has a great location in one of the fastest-growing regions of the world, and presents an attractive macroeconomic picture, with a young, cheap workforce, rising productivity, stable politics and the second fastest GDP growth in the region, after China.

It’s also, he said, “one of the best diversification plays around.”

Part of Cambodia’s fresh appeal comes from diminishing returns in the developed world and the global credit meltdown, which have driven investors farther afield in search of returns that aren’t correlated with Wall Street.

“Would I put all my money into Cambodia? I don’t think so,” Faber said. “It’s a small country. You can’t put a billion dollars in Cambodia.”

But, he said, “Every investor should consider having some investment in Cambodia, the way every investor should have more money in emerging economies than in developed markets.”

As for the risks, fund managers are plain: Cambodia’s weak legal system, corruption and immature accounting standards are all challenges, and though Cambodia plans to launch domestic stock and bond exchanges in 2009, the country’s undeveloped capital markets could limit exit strategies. One way venture capital investors cash out on investments is by taking companies they’ve helped grow public, on local or regional exchanges.

Deals can also be hard to come by in Cambodia.

Tong Yang has been trying to launch its fund since early 2007.

Brimble said Emerald hopes to fatten its deal pipeline by creating a network of young entrepreneurs, drawn from the children of Cambodia’s elite.

LR Global Partners in New York and Kazimir Partners in London have already provided seed money, he said.

Emerald has also brought on board Ken Loo, former secretary-general of the Garment Manu­facturers Association of Cam­bodia, and Ratana Phurik Cal­lebaut, general manager of the French Cam­bodian Chamber of Commerce.

The Cambodian Institute of Development Study, led by Kang Chandararot, will provide re­search support.

Yeo says CIDF will start by leveraging the existing business interests of its Cambodian partners; he also believes the fact that he and his partner are both fluent in Teochew will help CIDF seal deals with Cambodia’s small but economically potent Chinese population.

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