CITIC Private Equity Raises $1.3 Billion Fund

BEIJING (Reuters) – The private equity investment arm of CITIC Securities (600030.SS), China’s top brokerage, said it has raised 9 billion yuan ($1.32 billion) for its first industrial investment fund, the largest yuan-denominated private equity type of fund ever raised in China.

The National Council for Social Security Fund, China’s state pension fund, was the single largest investor in the fund, named CITIC Mianyang Private Equity Fund, CITIC Private Equity Funds Management Co Ltd said in an emailed statement on Wednesday.

CITIC Private Equity, established in Beijing in June 2008 during the global financial crisis, spent more than a year raising the fund.

The young company soon gained a high profile in the private equity industry, hiring top Chinese dealmaker Liu Lefei as chairman.

Before joining CITIC Private Equity, Liu was chief investment officer for China Life Insurance Co Ltd (601628.SS)(2628.HK), China’s top life insurer, where he helped jointly buy control of China’s Guangdong Development Bank with Citigroup Inc (C.N) in a landmark $3.1 billion deal.

Parent CITIC Securities is the brokerage and investment banking arm of CITIC Group, the country’s largest financial conglomerate, which is directly led by the State Council, China’s cabinet.

In 2008, CITIC Securities narrowly avoided taking a bath on a proposed investment in ailing Bear Stearns Cos Inc, which collapsed and was taken over by JPMorgan (JPM) with a U.S. government bailout.

CITIC Private Equity would focus on Chinese companies in four sectors — financial services, consumer goods, energy and resources, and manufacturing — according to the statement.

It said it had closed 10 deals with a total transaction value of more than 2 billion yuan over the past year.

Beijing has been encouraging private equity investment, regarding it as a new channel for corporate funding as banks become increasingly cautious in lending to the private sector.

At least 15 Chinese brokerages, including CITIC Securities, Guoyuan Securities 000728.SZ and Changjiang Securities Co (000783.SZ), have obtained regulatory approval to start private equity investments, seeking to expand revenue as competition intensifies in the brokerage and investment banking businesses.

By Michael Wei and Simon Rabinovitch
($1=6.826 Yuan)