China’s CITIC Postponing Launch of New Fund

HONG KONG (Reuters) – The private equity investment arm of China’s top brokerage, CITIC Securities, will postpone the launch of its first 6 billion yuan ($876.7 million) fund until the end of the first half of 2009, sources told Reuters on Wednesday, citing a shortfall in fundraising.

Earlier this year, CITIC Securities won Chinese government approval for its private equity investment business and had said it aimed to launch the fund before the end of 2008.

So far, about 2 billion yuan has been raised for the local currency yuan-denominated fund, and the firm is in talks with other potential partners, including rich Chinese entrepreneurs, to make up the rest, said the sources, who declined to be identified due to the sensitive nature of the situation.

“It takes time to convince some investors for their commitment, since the market environment is so unstable that many people just want to wait and see what will happen next in the market,” said one of the sources.

CITIC Group, China’s top financial conglomerate, which controls CITIC Securities and CITIC Bank, had committed part of the money to the fund, which would be managed by Beijing-based CITICS Private Equity Funds Management Co Ltd, according to the sources who have direct knowledge of the matter.

Officials at CITIC Securities declined to comment.

BEGINNING INVESTMENTS

CITICS Private Equity Fund Management is one of about a dozen Chinese brokerage-run private equity firms approved by Chinese securities regulator this year, as part of efforts by Beijing to assist the domestic private capital sector as banks become more hesitant about lending money.

Despite a lack of capital to launch the fund as planned before the end of this year, CITICS Private Equity Fund Management will complete commercial and legal registration of the fund first and begin to invest part of about 2 billion yuan that the firm has raised in some domestic projects, said the sources.

Before the launch of its first private equity fund, the firm attracted attention from the industry by hiring a top Chinese dealmaker to head its business.

In October, China’s top life insurer China Life’s chief investment officer, Liu Lefei, was appointed chairman of CITICS Private Equity Fund Management, sources with direct knowledge of the matter had told Reuters.

By George Chen

(Editing by Ken Wills)

($1=6.844 Yuan)