Singapore-headquartered venture capital firm Jungle Ventures is tapping wealthy investors eyeing an easier route to the city-state’s coveted permanent residence (PR) status for a new fund.
The VC firm is one of the two fund managers selected as the preferred providers under Singapore’s Global Investor Programme (GIP). The programme accords a PR status to eligible global investors interested in starting a business or investing in Singapore.
Applicants need to invest a minimum of S$2.5 million in one of three areas to be eligible – a new business entity or expansion of an existing business, a GIP fund that backs Singapore-based companies, or a Singapore-based single family office having AUM of at least S$200 million.
GIP funds launched by Jungle Ventures and Phillip Private Equity – JV GIP SPV 1 Pte Ltd and Phillip Ventures Enterprise Fund 6 Ltd, respectively – were selected to participate in the programme in 2019, according to updates on the Singapore Economic Development Board (EDB) website. The GIP is administered by Contact Singapore, a division of EDB.
GIP funds are required to have a minimum corpus of S$30 million and a maximum size of S$150 million and they must raise capital from applicants from at least two countries. The funds are mandated to invest at least half its corpus in Singapore-based companies in specific sectors. All of the investments must be made directly into unlisted companies.
Mercer Investment Solutions (Singapore), the independent rating agency for the funds, said in its assessment that the five-year tenure of the GIP programme could pose a risk for Jungle Ventures as the VC firm’s current funds have average investment ages of 3.5 to 4.2 years.
“The potential longer realization could pose a risk to the return of capital for GIP funds,” Mercer said in its October 2019 report.
Jungle Ventures’s GIP fund will collect an annual management fee and a performance fee, Mercer said.
The GIP fund’s maximum size of S$150 million ($109 million) compares with Jungle Ventures’s third Southeast Asia fund, which closed at $240 million in October last year.
According to an industry executive aware of the development, Jungle Ventures is looking to raise around $100 million for its GIP vehicle. It is likely to use the fund to make growth-stage investments in Southeast Asia.
The GIP fund will have to jostle for attention and resources with the VC firm’s traditional funds, said an executive at a large institutional investor that injects capital in traditional private equity and venture capital funds.
Jungle Ventures declined to comment for this story. It is unclear if the VC firm has previously explored the GIP route for fundraising.
Private equity firm Phillip, meanwhile, has operated five GIP funds previously. Its latest GIP fund will match the strategy of its previous funds and invest in expansion and late-stage deals or mezzanine type deals.
Phillip Private Equity’s parent, Phillip Capital, commits to the GIP funds as the largest investor, Mercer said.
Grace Tang, executive director at Phillip Private Equity, told DealStreetAsia the Phillip GIP funds generally put about 10 per cent of the fund into Singapore-based startups and 50 per cent into Singapore companies, while the remainder can be “anywhere else.”
She said the fund was opportunistic, but considered mainly shipping-related, consumer – particularly for China, India and Southeast Asia – healthcare, technology and supporting industries for resources.
She noted the previous funds’ shipping-related investments have done well, and the team has built up expertise in the sector. But Tang added that she’s looking more closely at the healthcare sector due to the pandemic.
The number of LPs in a fund depended on the number of GIP applicants, she said, noting that previous Phillip funds had “a lot,” but in recent years, stringent criteria – including increasing the minimum investment from S$1.5 million to S$2.5 million — have lowered the number of applicants, and by extension the fund size as well. The minimum investment was increased in 2011.
She said in 2000, the fund size reached S$200 million, but now, on average, the fund size runs around S$50 million, or 20-30 LPs. Tang described the “know your customer” process for applying to invest via the GIP program as “very stringent.”
Fundraising has been slower for the latest fund, because of the inability to meet applicants face-to-face, she said.
The current fund opened in October, and it will remain on the approved list for two years, with EDB then potentially requiring the fundraising to close, she said.
The Phillip fund will collect a management fee of 2.5 per cent a year, and a performance fee of 20 per cent, the Mercer report said, noting none of the previous funds had passed the return hurdle. Tang said the GIP funds are focused on risk control and capital preservation due to the shorter fund life of five-plus-one years.