Challenger-Mitsui holds final close, eyes first Asian deal

The Challenger-Mitsui Emerging Markets Infrastructure Fund has held a final close on $273 million and is “actively engaged” in negotiating its first deal in Asia, the firm said in a statement.

The Asian infrastructure-focused fund attracted capital commitments from the Japan Bank for International Cooperation and 13 other institutional investors at the final close last month.

“The majority of the capital was raised in Japan,” joint managing director Masayoshi Hosoya said in the statement. Fund executives also “dedicated a substantial amount of time to increase awareness of the infrastructure asset class” in that country, Hosoya said.

The firm has partial roots in Japan via its backing from Japanese trading house Mitsui. Mitsui joined forces with Australian asset manager Challenger Financial Services Group to launch the fund in June 2008. At the time, they were hoping to raise $1.2 billion. Mitsui, Challenger and four Australian pensions provided seed capital for the fund at kick-off.

Like other fund managers looking to raise capital during the financial crisis, Challenger-Mitsui ultimately scaled back its ambitions and revised its target to $650 million.

JPMorgan Asset Management’s Asian Infrastructure & Related Resources Opportunity Fund, another Asia-focused infrastructure fund in the market during the last two years, raised $858.6 million against an original target of $1.5 billion.

The Challenger-Mitsui fund had previously invested $80 million in two gas distribution companies in Chile: Gas Valpo and Energas. Aside from these investments, the fund has been “patient with respect to deploying capital” because “valuations remained stretched”, joint managing director Andrew Jones said in the statement.

“However, over the last few months we have seen more realistic valuation expectations from vendors,” Jones added. The firm is now “actively engaged” in discussions over its first Asian deal, according to the statement.

The fund targets 70 percent of its investments in the Asia Pacific economies of China, India, Thailand, Vietnam and Indonesia. All are countries where joint venture partner Mitsui has offices.

Previously, the firm targeted emerging economies outside Asia, including Latin America. But in February 2009 Challenger-Mitsui shifted its focus to Asian economies, a response to the firm’s belief that the region will hold more opportunities for infrastructure investors.

Two of its executives will spend more time on deal execution in Asia. Saji Anantakrishnan and Hiroto Asakawa will now focus on originating deals out of the firm’s Singapore office, as opposed to fundraising, the firm said.