China’s CDH Raising $1.4 Billion PE Fund

HONG KONG(Reuters) – CDH Investments, backed by Singapore’s sovereign fund and the World Bank, is raising a $1.4 billion private equity fund, its fourth fund targetting growth-stage companies in China, a source said on Tuesday.

CDH, established in 2002 as a spin-off from China International Capital Corp, the investment banking joint venture one-third owned by Morgan Stanley (MS.N), has recently raised $750 million for the new fund’s first closing period, said the source who was briefed on the plan but declined to be identified as the fund-raising process is private.

CDH aims to complete fund-raising and reach the target of $1.4 billion for the new China-dedicated private equity early next year, said the source.

Wu Shangzhi, chairman of Beijing-based CDH, told the SuperReturn Asia Conference that the firm is closing its fourth fund soon but he declined to disclose the size of the fund publicly due to company policy.

Wu, an influential private equity executive in China, said he believed consolidation in many industries in the country will bring huge buying opportunities to private equity funds and returns are expected to be higher in the coming years.

Beijing, which has historically viewed private equity firms as speculators, is becoming more welcoming of international and domestic private equity funds as it seeks to boost investments in China, thereby creating more jobs.

The Government of Singapore Investment Corp (GIC), the bigger of Singapore’s two sovereign wealth funds, and the International Finance Corp (IFC), the private investment arm of the World Bank, are two major institutional investors, also known as “limited partners” of CDH’s new fund, said the source.

Singapore’s GIC and IFC also participated in CDH’s previous fund-raisings.

CDH’s last China fund is about $1.5 billion and about 85 percent of capital in the third fund has been invested, the source said, adding it was not difficult for private equity firms to secure investment for China-concept funds.

Instead, some speakers at the SuperReturn forum in Hong Kong noted there may already be too much private equity money in Asia, which will stiffen competition for dealmaking.

More than 50 percent of participants in the SuperReturn forum voted China as the place for best investment returns in the next three years, but many raised concerns about the country’s regulatory environment and investment exit options, a straw poll conducted by the forum’s organiser showed.

By George Chen
(Additional reporting by Junko Fujita, Editing by Jacqueline Wong)