China dominates PE growth-capital fundraising
Seven China private equity growth equity funds are in the process of raising $8.1 billion, dominating global fundraising in the deal space for earlier-stage investments and flying in the face of a difficult exit environment in the mainland, according to data provider Preqin.
The 10 biggest PE funds being raised on a global basis are seeking combined capital of $13.4 billion for growth equity, led by US-based Technology Crossover Ventures, whose Fund VIII has a target of $2.3 billion.
China’s CDH Investments is raising a similar amount – $2 billion – for its Fund V, which launched in September last year and is said to have secured capital from sovereign wealth funds. Other limited partners include US pensions Texas County and District Retirement System and Maryland State Retirement and Pension System, according to public document filings.
Meanwhile, China Bright Stone Investment Management Group is aiming to raise a total of $2.3 billion for two separate funds.
Its renminbi-denominated Blue Economic Zone Industrial Investment Fund I, which will invest in projects on Shandong’s coastal development zone, targets Rmb8 billion ($1.3 billion), according to Preqin. Meanwhile, dollar fund China Ocean Economy Industry Investment Fund I is raising $1 billion for development projects on the Zhejiang coast.
China Bright Stone’s funds aim to encourage development in line with government initiatives and, as such, are similar in principle to large state-linked funds of PE funds that support China’s plans to develop its domestic PE industry.
Other mainland firms that are in the market for growth capital are China Science and Merchants Capital Management and Inventis Investment Holdings (China), each raising $1 billion, and ABC International Holdings, which is seeking Rmb5 billion.
However, China is slightly behind the US in terms of total number of growth funds in the market, with 41 mainland vehicles as opposed to 49 from US managers. Indian general partners (GPs) are raising capital for 23 funds, followed by 15 vehicles from Hong Kong-based GPs and nine from Singaporean managers.
A total of 232 growth PE funds are in fundraising mode, seeking a combined $63 billion in capital, with emerging markets the main focus. Between 2006 and the third quarter of this year, Asia-focused funds represented 51% of growth capital funds that had achieved a final close, with those focused on North America and Europe representing 19% and 15%, respectively.
With seven of the 10 biggest vehicles focused on China, and a notable number of Indian GPs also in fundraising mode, they are seeking deals that would find growth amid demographic trends of a growing middle class and increased spending on consumer goods and services, notes Preqin.
China’s e-commerce giant Alibaba Group is among the most notable large growth-capital deal in Asia, having raised $1.9 billion in September last year from mainland firms Boyu Capital, CDB Capital and Citic Capital, as well as from existing investors DST Global, Silver Lake and Singapore state fund Temasek.