The fund will focus on investments in private Vietnamese companies, with an expected average investment size of $3 million. It aims to make four-to-five investments per year.
Investors in Mekong Enterprise Fund II include government-related finance institutions, such as the Asian Development Bank and HollandÆs FMO; private sector financial institutions; investment funds; as well as high net-worth families and individuals. Approximately 48% of the FundÆs capital comes from Europe, 27% from the US and 25% from Asia.
In addition to managing the new $50 million Mekong Enterprise Fund II, Mekong Capital is the investment manager of the Mekong Enterprise Fund, an $18.5 million private equity fund, launched in 2002, that has made 10 investments in Vietnamese private companies.
"This is an important milestone for Mekong Capital. Although our first fund has been successful in terms of the growth rates of our companies and the achievements that they have made, we believe the second fund is in an even stronger position due to the experience our team has developed," says Chris Freund, founder and managing director of Mekong Capital. "For the second fund, we plan to stay close to our core competence of helping companies to make operational improvements and continuously strengthen their management teams."
He says the fund will also plan to focus more on companies selling into the domestic market as opposed to export markets.
As a private equity fund, Mekong Enterprise Fund II will invest in unlisted companies, which, at the time of the original investment, are typically about two-to-four years away from a listing on one of VietnamÆs stock exchanges. Mekong Capital will work closely with investee companies to help them make improvements and prepare for a successful listing on a stock exchange. Unlike portfolio investors who tend to be more passive, Freund says his company strives to add value as an investor and works closely with investee companies to make various improvements. The fund aims to make minority investments, usually representing 20-30%, in well-managed, fast-growing, private Vietnamese companies.
However, Freund says Mekong Capital will also consider opportunities to invest in buyouts of private, equitised and foreign-owned companies in Vietnam. The fund will generally focus on companies involved in manufacturing, branding and distribution. This leverages Mekong CapitalÆs strengths relating to manufacturing û such as lean manufacturing, six sigma, activity-based costing, as well as Mekong CapitalÆs experience working with manufacturing companies to improve operational procedures and strengthen management teams.
Mekong Capital was founded in 2001 and is more than 60% owned by its 15-member team.