Increasing Trend Towards China-Based GPs Raising Offshore-Focused Funds

by Wan Ping Chia

  • 20 Apr 2012
  • PE

Sino-Lusophone Countries Cooperation and Development Fund I, a private equity vehicle managed by China-based China Development Bank Capital, in collaboration with Macau Commercial and Industrial Development Fund (MCIDF) will target Portuguese-speaking countries including East Timor, Brazil, Angola, Cape Verde, Guinea-Bissau, Mozambique and Sao Tome and Principe. The fund, also known as Zhongpu Fund I, is the first fund in a series of vehicles to be raised by the group that has an aggregate targeted size of $1bn. If successful, Sino-Lusophone Countries Cooperation and Development Fund I will be sized at $200mn and will invest in various development projects and firms within the infrastructure, transportation, telecom, energy, agriculture and natural resources industries. It also aims to support companies that are looking to launch joint ventures in China. The fund prefers matured, growth stage enterprises and will seek to attract capital from Lusophone countries.

As the private equity market sees an influx of China-based fund managers raising China-focused funds, Sino-Lusophone Countries Cooperation and Development Fund may help to kick-start a trend towards China-based GPs raising private equity vehicles focused on non-Chinese regions.

Amongst the private equity funds (excluding real estate and infrastructure) raised by China-based fund managers and were closed in 2011, 96% of the funds are solely focused on Asia, garnering an aggregate $11.4bn in capital. In contrast, the 4% of these vehicles that included non-Asia opportunities within their focus represented a total of $625mn raised from investors. Amongst the funds closed in 2011 raised by China-based GPs, a hefty 93% are wholly focused on China, raising an aggregate capital of £11.1bn.

Currently, there are 83 private equity funds raised by fund managers located in China. Mirroring trends of funds closed recently, 94% of these vehicles are solely targeting opportunities based in Asia, representing a total targeted amount of $25.3bn. Eighty-four percent of the total number of funds managed by China-based managers have a sole focus on China and are seeking an aggregate $23.5bn. On the other hand, the remaining 6% of funds currently on the road include non-Asia regions within its investment strategy, seeking to attract a total of $2bn from investors.

While only a small proportion of China-based managers are raising funds to target international opportunities, this proportion is increasing. Going forward, as China-based fund managers gain more knowledge and experience in the private equity arena, the private equity universe may expect to see a greater number of these managers venturing offshore to target investments situated outside Asia. 

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