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China’s Hony Capital Raising up to $2.6B

(Reuters) – Hony Capital, one of China’s most successful private equity funds, aims to raise up to $2.6 billion in a new fund, two sources said on Monday, in what is set to be the biggest ever dollar fundraising for a China-based firm.

Hony’s fifth dollar fund is nearly double its previous $1.4 billion fund raised in 2008, sources with direct knowledge of the matter told Reuters. Hony CEO John Zhao had flagged the fundraising in June without giving details.

The launch of the Hony fund comes as several global buyout shops are raising new funds in Asia, underlying the global buyout industry’s bullish view on the region’s economic growth. KKR & Co LP is raising up to $6 billion, and TPG Capital is raising $4-5 billion for pan-Asia funds.

The biggest previous fund raised by a China-based, China-focused firm is $2.5 billion by Hopu Investment Management in 2008, according to data provider Preqin.

Hony Capital, backed by Legend Holdings, declined comment. Hony has raised more than $2 billion in four dollar funds from investors including Goldman Sachs, Temasek and Stanford University since 2003.

Hony’s other investors include the Bill and Melinda Gates Foundation, California State Teachers Retirement System and Canada Pension Plan Investment Board among others.

The sources were not authorized to speak to the media.

Private equity firms around the world have found it tougher to raise money since the global economic downturn in 2008, though Asia-Pacific has seen its share of global fund raising rise to 22 percent from just 9 percent in 2008, Preqin said in a recent report.

Europe accounted for 23 percent of fundraising, according to Preqin.

A small portion of the Hony fund may be used for overseas investment, the sources said. After years of focusing on their home turf, Hony and other China funds are expanding abroad, slowly but steadily moving across Asia and into parts of the Western market.

Hony CEO Zhao told Reuters earlier this year that technology firms in the U.S., Europe and Japan could improve their value significantly if they could get their products into China.

The firm has raised four U.S. dollar funds and two yuan funds, and has around $4.4 billion of assets under management.

(Reporting by Stephen Aldred; Editing by Denny Thomas and Will Waterman)