China Merchants raising first foreign-asset PE fund

Dec 15, 2016

The private equity arm of the mainland group targets $500 million for the first close of a strategy that will largely invest in Asia and Europe. It ultimately hopes to raise $5 billion.

China Merchants raising first foreign-asset PE fund

China Merchants Group’s private equity arm hopes ultimately to raise $5 billion for a fund that will be its first to allocate overseas, AsianInvestor has learned. Whether it does so will be conditional on the performance of its initial investments, noted sources.

Hong Kong-based China Merchants Capital (CMC) is targeting $500 million for the first close of what is only its second dollar-denominated PE strategy. It has already secured $350 million from Chinese institutions and aims to raise the remaining $150 million from foreign investors. AsianInvestor could not ascertain when the firm expects to make the first or final close.

The Belarus-Europe Fund (BLR-EUR Fund) will invest mostly in Europe – where the Baltic countries will be one region of focus – and Southeast Asia. Target sectors include advanced machining, high-end consumer goods, new technology and healthcare.

CMC, which has assets of Rmb200 billion ($29 billion) under management, is likely to make the first round of investments after Chinese New Year (January 28) and probably in February, a source told AsianInvestor.

The fund is understood to have been set up as part of China’s ‘one belt, one road’ Asia-to-Europe infrastructure initiative, which envisages facilitating trade and investment across Eurasia.

China Merchants Group became the main constructor and operator of the Minsk-based China-Belarus Greatstone Industrial Park in 2015, and was encouraged by governments of both countries to set up a fund to help the development of the park.

The park was registered in 2012 after the concept was first mooted in March 2010 by Belarussian president Alexander Lukashenko and Xi Jinping (pictured), then China’s vice president.

The new fund has expanded the investment scope of the original strategy to cover Europe and Asia and manage it in a commercial manner.

CMC is not the only mainland firm to run a commercially managed ‘one belt, one road’ PE fund. State bank ICBC launched a European investment fund in early November that focuses on infrastructure, high-tech manufacturing and consumer goods in central and eastern Europe. The fund aims to raise €10 billion, with ICBC committing €1 billion.

CMC’s first dollar-based PE portfolio is China Merchants China Direct Investments, which was set up in 1993 and listed in Hong Kong the same year. It mainly invests in private Chinese firms and as of June 30 had AUM of $562 million.