Citic PE Unit Launches $1.9B Fund

SHANGHAI, Sept 27 (Reuters) – The private equity unit of Citic Securities, China’s biggest listed brokerage, has launched its third private equity fund, aiming to raise 12 billion yuan ($1.9 billion), two people with direct knowledge of the plan told Reuters.

Citic Private Equity Funds Management Co (Citic PE) also aims to raise 5 billion yuan for its mezzanine fund and has so far raised 3 billion yuan, one of the sources said.

Citic PE competes with domestic and global rivals including Blackstone Group LP, TPG Capital LP and the Carlyle Group in China’s booming private equity market, which Beijing hopes will channel liquidity into the real economy to drive innovation and aid growth.

“Citic PE has an advantage over even some of the global PE brands in raising local-currency funds,” said Wesley Li, analyst at consultancy ChinaVenture.

“The company has a strong investment team, local expertise, good relationship with institutional investors and a nice track record.”

Citic PE currently manages a 9 billion yuan local-currency fund and a $1 billion U.S. dollar fund that counts overseas sovereign wealth funds, pension funds, endowments and insurers as investors.

Its third private equity fund, to be worth 10 billion-12 billion yuan, will invest in industries including financials, retail, pharmaceutical, manufacturing, energy and materials, the people said.

Citic PE is also launching a mezzanine fund, which typically provides financing — structured as debt or preferred stock — for large-scale construction projects, start-up companies in growth industries, leveraged buyouts, among others.

Citic is capitalising on China’s red-hot private equity market that has seen a step up fundraising activities.

August was the most active month in terms of fundraising so far this year, when 12 private equity and venture capital funds were launched in China with a combined fundraising target of $7.96 billion. That was double the amount announced in July, according to ChinaVenture.

The boom has been fuelled partly by China’s prosperous IPO market — the world’s biggest last year — which enabled investors to exit at relatively high valuations.

($1 = 6.401 Chinese Yuan)

(By Samuel Shen and Jacqueline Wong; additional reporting by David Lin; Editing by Kazunori Takada)