September 28, 2012
Reposted from Dow Jones
By Sonja Cheung
Investors are venturing further into the emerging markets as China and India become more mainstream, with a few players seeking deals in “frontier” countries like Myanmar and the Kingdom of Bhutan. One such general partner is Leopard Capital, which is currently in talks with potential investors to raise funds that will separately target deals in Bangladesh, Myanmar and Bhutan, said the firm’s Founding Partner and Chief Executive Douglas Clayton, who was interviewed at the SuperReturn Asia conference in Hong Kong.
The firm is looking to raise a $100 million Bangladesh fund, a $75 million vehicle that will target transactions in Myanmar — and possibly Cambodia and Laos, as well. In addition, the firm is seeking a $20 million Bhutan fund. Mr Clayton said Leopard is targeting a first close for these funds in the first quarter of 2013, followed by a final close in 2014.
For the Bangladesh fund, the firm will look at investments in the manufacturing sector, for example, with a sweet spot of $10 million per deal, Mr. Clayton said. Meanwhile, for the smaller Bhutan fund, it’s likely to invest $500,000 per deal.
“Frontier markets are on a different growth trajectory than the rest of world,” Mr. Clayton said while speaking on a panel at the conference, explaining that frontier countries are more concerned about what’s happening in their local markets, than what’s happening on a global scale.
However, challenges at investing in frontier markets include a lack of human resources, said Mandar Jayawant, founder and managing director at Mongolia Opportunities Fund, who was also part of the panel. In addition, firms have to compete to attract investment from limited partners, who are typically “more comfortable” with China- or India-focused funds.
Mr. Jayawant said that Mongolia Opportunities Fund courts a “different type of investor” such as corporations, rather than family offices. Mr. Clayton also said Leopard seeks “contrarian” investors, who also include some family offices. He added that development banks will back Leopard’s funds’ first close, after which private investors will support the final close.
“Risk perception is higher than what it is,” Mr. Jayawant said in regard to investing in frontier markets, especially in Mongolia. “Returns are high if you come in early.”
Photo Credit: Leopard Capital