The Maculus funds position themselves as hybridized private equity and distressed debt structures. A third fund is planned for launch later in 2006 with the target of raising $688 million. The first one, launched in 2004, raised $138 million.
Denys Firth, Hong Kong-based director of ADM, says, "The ADB expects us to act more responsibly than vulture funds coming out of the USA." The ADB has seeded this fund in order to ensure the companies receiving the money adhere to a variety of guidelines or standards such as pollution emissions.
William Willms principal investment officer at the ADB in Manila, wouldn't say whether ADM would blacklist companies that remain run by people with a track record of financial mismanagement. Chris Botsford, principal of ADM argues that many of these companies have struggled because of adverse macro-economic conditions rather than because of deliberate bad practices.
All three Maculus funds have five-year maturities. This latest edition has a targeted investment rate of return of 25% and is aimed at institutional investors, especially endowments and pensions funds in the United States and Europe.
Benchmarking the ongoing performance of the funds is problematic, as it is not possible to mark-to-market the investments in any meaningful way until an exit takes place, potentially via an IPO or injection from private equity.
The new fund's geographical focus will emphasize China, with an earmarked 57% of allocations, followed by Thailand with 28%. Sector distribution is primarily real estate investments, followed by NPL acquisition and transportation businesses amounting to 28% each. The first Maculus fund focused on cement and real estate. ADM is still considering how to focus the third one.
Commenting on its China distressed debt intentions, ADM's CIO, Robert Appleby, says: "It is a challenge for the four PRC asset management companies given their dual role of seller and servicer of the loan portfolio. It can cause a conflict where the loan servicer is also the vendor. This is made greater by the asset management companies being allowed to take an economic interest in the portfolio."