Ashmore adds nearly $6bn to assets
Ashmore Group is looking to raise at least $2.8bn (€1.76n) for its latest emerging markets private equity and distressed debt fund, after announcing $6bn asset growth for the year to June 30.
The emerging markets fund manager has taken $3bn in new subscriptions and made $2.9bn in returns on its investments over the last 12 months, boosting asset growth by 18.7%. It now manages $37.5bn.
Inflows, which included $1.2bn in the final quarter, came primarily from institutional investors who comprise about 85% of the firm's clients, said Jerome Booth, head of research.
Booth said Ashmore's latest private equity and distressed debt fund, Global Special Situations Fund 5, could now be kept open until early 2009, to give institutional investors more time to conduct due diligence on the firm. He said that it will be at least double the size of its previous two funds.
Ashmore raised $1.4bn for its third special situations fund in August 2006 "in a number of weeks," before drawing this money down in about 11 months, Booth said. It then raised $1.3bn for its fourth special situations fund, in October 2007.
The average internal rate of return on the 103 emerging market special situations deals Ashmore has exited since launching its first fund focused on this strategy in 1998 has been 38%, Booth said.
He added that most of the latest fund's capital would be invested in private equity "because there's not a lot of distress around in emerging markets". Institutional investors were moving money from US and European private equity, where returns may be lower, to funds focusing on emerging markets, he said.
"There is still a big home country bias in North America and Europe, and it's just inappropriate. It is like being in an earthquake zone and saying I'm investing in domestic real estate because it's local."
Booth said private equity managers investing in the US had a "war chest mentality where people raise a lot of money but don't know what to do with it. They find a company they think is undervalued, leverage it to the hilt and then shout about it to convince someone else to buy it from them."
That model, he said, depended on the availability of leverage, which he said was not as readily available now as it had been before the credit crisis. Ashmore's special situations funds employs no leverage.
While Booth was bullish, share analysts at Clear Capital Research said Ashmore would face pressure on both inflows and performance.
"Consensus expects Ashmore to increase its funds under management by $5bn to $6bn per annum for the next three years (however) we expect these figures to be revised downwards for the 2009 financial year and beyond," Clear Capital Research said in a broker note.
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