Warburg Pincus China notches $2 bln in first and final close

  • Warburg’s first dedicated China fund was oversubscribed
  • China team lead by Julian Cheng and Frank Wei
  • New fund will invest 50-50 alongside Warburg’s $13.4 bln flagship

Warburg Pincus on Dec. 14 held a first and final close on $2 billion for its first dedicated fund for Chinese investments, the firm said in a statement.

The firm closed the oversubscribed fund after just six months on the market despite losing the head of its China team, David Li, in early 2016. Li, who left to launch his own firm, was succeeded by longtime Warburg Pincus executives Julian Cheng and Frank Wei.

“Over the past two decades, we have partnered with some of the most successful entrepreneurs and companies in China and our pipeline is robust,” Cheng said in a statement.

Warburg Pincus was forced to cut each of its limited partners’ preferred allocations to the fund due to heightened demand, a source with knowledge of the fundraise said.

LPs in Warburg Pincus China LP include Minnesota State Board of Investment, New Jersey Division of Investment and Washington State Investment Board, Buyouts has reported.

At least some of that demand can be attributed to the firm’s track record in China, which New Jersey investment staff, in a memo earlier this year, called a “strong performance over a large number of investments.” New Jersey pledged as much as $100 million to the fund in September.

Warburg Pincus has invested $6 billion in 67 Chinese investments since 2005, netting a 17 percent internal rate of return and 1.8x multiple on invested capital, the New Jersey memo shows. The firm returned $6.1 billion on realized or partially realized investments, netting an 18 percent IRR and 2.2x multiple. Eight of the firm’s Chinese portfolio companies held public offerings since 2015.

“We attribute our persistent record to identifying growth themes and partnering with talented management teams. We will continue to invest behind long-term secular trends such as consumption, urbanization, mobile technology, healthcare, and the ongoing evolution of the financial sector,” Wei said in a statement.

Warburg Pincus China LP will invest on a 50-50 basis alongside the firm’s latest flagship fund, which closed on $13.4 billion in 2015, according to the New Jersey report. As with its dedicated energy vehicle, which closed on $4 billion in 2014, Warburg Pincus used the China fundraise to attract LPs from outside its existing pool of flagship fund investors.

Warburg Pincus was founded in 1966 and has more than $40 billion under management. The firm maintains offices in New York, Amsterdam, Beijing, Hong Kong, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai and Singapore.

Action Item: More about Warburg Pincus: www.warburgpincus.com

Workers peel papers off a wall as they repaint the Chinese Communist Party flag on it on May 21, 2014. Photo courtesy Reuters/Chance Chan 

Correction: An earlier version of the story reported that seven of Warburg Pincus’s Chinese portfolio companies held IPOs since 2015. Eight of its companies held IPOs in that period.