Pride to raise $50 million for pre-IPO China fund

Lewis Wan, former CIO of Marco Polo, is moving his focus from A-shares to pre-IPO stakes.
Pride Investment, a China-focused fund management group founded by Lewis Wan, the former CIO of Marco Polo Investments, says it is raising $50 million for its latest China pre-IPO investment fund. The fund will invest in selective names and sectors that will benefit from the governmentÆs national development plans and economic policies.

Minimum investment in the fund is HK$500,000. Investors will receive regular dividends from Pride Investments but will not be allowed to re-invest in the fund.

Unlike WanÆs previous work with Marco Polo, the new fund only deals in venture capital and pre-listing opportunities. There will be no A-shares in the fundÆs initial portfolio. He is focusing on consumer plays and environmental themes, which he says will benefit from the central governmentÆs policy to bolster disposable incomes and its five-year plan to reduce total energy consumption by 20%.

The government wants to transform ChinaÆs GDP composition from an export-driven economy to more of a domestic consumption-driven economy, he notes. The government expects this transformation to enhance economic stability and provide new levers for bureaucrats to exert influence.

One example of an effort to raise disposable income: the government has recently ended all agriculture-related taxes, benefiting the 700 million Chinese still tied to the land. It also plans to reduce income taxes.

Wan identifies water bottlers, health food chains and selective bakery names as excellent VC and pre-IPO opportunities. These companies will have the pricing power to counter the current challenge of inflation, while tapping into the rising power of Chinese consumption.

He further says that equipment makers in renewable power or environment-related technology companies will witness a coming boom. Whereas wind-power companies are dependent on government subsidies and have questionable survivability in the immediate term, the outlook for wind-power equipment looks bright.

Overall, Wan is optimistic about ChinaÆs economic outlook but says a continued correction in ChinaÆs A-share market will be an unavoidable problem. He is timing his market exits for these projects beyond 2010. He says returns on investments over the long term could yield 10 times.
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