Middle East investors back Southeast Asia-focused PE funds in diversification move

Middle Eastern institutional investors are keen to leverage the growing economies of Southeast Asia as they diversify their portfolios amid escalating tensions between China and the West, according to TVM Capital Healthcare, a Dubai and Singapore dual-headquartered private equity firm.

"Middle Eastern family offices used to focus almost exclusively on the US and Europe. They did not look at Asia, and that's changing now," said Helmut Schuehsler, chairman and CEO at TVM Capital Healthcare after his firm announced the closing of its second Middle East fund, which drew US$250 million last month.

The TVM Healthcare Afiyah Fund LP saw the participation of institutional investors from gulf countries and Europe, led by Jada Fund of Funds, a subsidiary of the Public Investment Fund of Saudi Arabia, and Saudi Venture Capital (SVC).

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"There are established ties between China and countries like Saudi Arabia and the United Arab Emirates, but more recently, given the political developments with China and the United States, Middle Eastern countries are trying to stay fairly neutral and develop deep ties with everybody, including and in particular Southeast Asian nations," Schuehsler said.

TVM Capital Healthcare has already invested in three targets out of the new fund, including Alina Vision, which is a Vietnam-based eye care services provider.

TVM Capital Healthcare is also raising a separate Southeast Asia fund with a target size of US$150 million to US$200 million. The new fund, which has commitments from two lead investors from the Middle East, is expected to have its initial closing, the first time that investors commit to making their investment in the fund, by the end of this year, according to Schuehsler.

In addition to geographical diversification, Middle Eastern limited partners (LPs) are also broadening their investment strategies, moving beyond traditional real estate investments to explore alternative asset classes such as private equity, said Schuehsler.

"When I say private equity, I mean the big companies - they were the primary recipients of capital," he said. "But as time progresses, Middle Eastern investors have become more diversified in their approach to the private equity world, and they are looking at smaller businesses and smaller private equity houses that are more focused on growth capital."

Active in the Middle East since 2010, TVM Capital Healthcare invests in expansion and growth stage companies that have started generating revenue streams and represent a "substantial" growth opportunity. With a special focus on healthcare manufacturing and services, the fund manager invests in ticket sizes of US$10 million to US$30 million, according to the chairman.

"We do not shy away from taking a majority in a company, and at the minimum, we want to be a substantial minority," he added.

The company plans to allocate all of the capital raised in the Afiyah fund to six to eight targets by the end of this year, the chairman said.

"What will happen in the next 10 years is that Asia will become more mature as an investment destination, and there is a lot of entrepreneurial activity in there," Schuehsler said. "The region will be come a third pillar of international diversification for Middle Eastern investment."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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