Temasek taps homegrown fund to help SMEs take next step

SINGAPORE - Another helping hand has been extended to small and medium enterprises (SME) that are on the cusp of greatness.

Temasek Holdings has tapped homegrown hedge fund Dymon Asia Capital to manage an initial $203 million of public and private funds, which are aimed at growing local SMEs regionally and internationally.

The newly created Dymon Asia Private Equity fund is hoping to invest in Singapore and South-east Asia-headquartered companies with revenues of between $10 million and $500 million, revealed Dymon Asia Capital founding partner Keith Tan, who will lead the fund with private-equity veteran Gerald Chiu.

"Funds have traditionally focused on the larger economies of China, India and Australia, or looked to invest in larger companies in South-east Asia," Mr Tan told BT.

"Companies here which need less than $50 million for growth capital or for a buyout generally do not get the attention they deserve from the large funds. There are some excellent companies in this space, who need the capital for overseas expansion or acquisitions, and who need a good partner who can provide both the capital and the expertise."

The fund, which has an eight-year lifespan, closed its first round of fund-raising last week with $100 million from Temasek's SME-focused fund, Heliconia Capital Management, and $103 million from private investors. The fund plans to raise at least another $100 million eventually, Mr Tan said.

Heliconia's contribution was part of an initial $250 million seed injection by the Singapore government under an SME-nurturing programme. The size of the programme is expected to hit $1.5 billion eventually, and comprise equally matched public and private capital.

The Dymon outfit will join a small but growing number of private-equity funds looking for opportunities here and in the region.

In August, Heliconia placed some capital with private-equity fund Credence Partners, which is led by long-time tech investor Koh Boon Hwee, to invest in SMEs. Sirius Venture Capital, started by CrimsonLogic chairman Eugene Wong, has been in the space since 2002.

The Dymon fund will look for "sweet-spot" investment sizes of $20 million to $50 million, Mr Tan said. The length of each investment will vary, but business plans will typically take three to five years to execute.

Education, healthcare and branded food-and-beverage companies that will benefit from the growing incomes in the region are particularly interesting, said Mr Tan. The oil and gas sector and specialised engineering and industrial services also have potential, he added.

"However, within the SME space, there are often hidden gems with unique strengths in any sector."

He reckons that he and Mr Chiu are well positioned to find those gems. Mr Tan cut his teeth many years ago helping SMEs secure loans as an executive at Standard Chartered, and is an entrepreneur himself, having co-founded Dymon Asia Capital, the best performing hedge fund manager in Asia in 2011. Mr Chiu was a former partner at private-equity firm Navis Capital.

"We are both very excited about the prospects for Singapore SMEs," Mr Tan said. "And we believe that we have a good mix of skills to help them grow."

The fund has also assembled an "industrialist panel" of self-made business leaders with an average of 20 to 30 years' experience to help investee companies.

"These industrialists can mentor the SMEs we partner with and provide real-world advice on things like talent management, branding or overseas expansion," Mr Tan said.

SMEs have reacted positively.

Ang Yuit, managing director of Web development firm The Adventus Consultants and vice-president of strategies and development for the Association of Small and Medium Enterprises (Asme), said that it was encouraging that the government and the private sector were working together to develop SMEs.

But he felt that the benefits of a PE fund could be limited to only a handful of businesses. "You may actually have a situation where they are targeting a very small segment . . . then for most SMEs, it's not relevant for them, which may not be a bad thing because that's the objective."

Thomas Fernandez, chief executive of PestBusters, noted many examples of SMEs that have benefited from private equity, such as restaurant chain Paradise Group. The key is to make sure that both investor and investee share the same goals, he said.

"If they understand that the business can grow, if they understand the needs, it's wonderful," Mr Fernandez said. "If they come in and they put money and the pressure, I don't welcome that, because they don't believe in the people or the business, they're just gambling."