Hong Kong-based private equity firm FountainVest Partners has gathered $2.1 billion for its third fund to back the winners in industry consolidation across China .
Led by Frank Tang, formerly head of China investments at Singapore's Temasek and a Goldman Sachs banker, FountainVest raised the capital in the space of a few months, according to an industry source.
“We believe that industry consolidations will intensify, mergers and acquisitions will create national leaders,” said Tang, who focuses on the media, healthcare and consumer sectors.
FountainVest China Capital Partners Fund III is a big step up in size from the firm's $1.35 billion second vehicle. The new fund was oversubscribed due to existing clients returning in force, as well as commitments from several new institutional investors.
The very swift capital drive happened in a tough environment for Chinese private equity, as the economy slows and stock-market regulators force companies to wait in a long queue before listing.
China-based funds have secured $12 billion this year, well down on the $32 billion and $34 billion raised in 2014 and 2015, respectively, according to data provider Preqin.
Investors in private equity, known as limited partners (LPs), are closely screening funds’ track records and team stability given the current mainland market.
FountainVest’s founders have worked together since the mid-1990s through multiple economic cycles. Early investors in FountainVest’s funds included: Canada Pension Plan Investment Board (CPPIB), Ontario Teachers' Pension Plan and Temasek Holdings.
The firm was set up by four partners: Tang, Terry Hu, George Chuang and Chenning Zhao. The four have all worked for state investment firm Temasek. Before he joined Temasek, Tang spent 11 years at Goldman Sachs.
The manager also bought a 10% stake in Imax for $40 million and sold shares during the firm’s $285 million Hong Kong IPO in September last year.
FountainVest continues to co-invest with CPPIB. Together they sold stakes in US firm Key Safety Systems in February.