CNEI closes ahead at $255 million

The final close is especially significant given the timing of CNEI’s capitalraising. “Most of our-fundraising was really done last year, in 2009, which was probably the toughest period for a long time in fundraising,” Johannes Schoeter, Founding Partner at CNEI, told AVCJ. Following earlier reports of unprecedented LP interest in China, he pointed out, “The interest for China was certainly higher than other markets, but even for China there was very little money available last year.” The firm’s first close, in November 2008, was, “in the middle of the nuclear winter.”

Track record and economic drivers

Schoeter noted the result was achieved because of CNEI’s track record. “We have never had a single impairment; there were zero writedowns in our portfolios.”
According to CNEI, the preceding Fund I had $113 million in commitments with nine investments made in China since 2007. “A crucial factor [in] our success was the support from our existing LPs from Fund I,” said Schoeter. “All the LPs that were investing last year came back, and some of them with significantly higher commitments. One LP increased [its] commitment eightfold.”
The new fund has already made two investments, one in IAT, a leading independent automotive pre-production services company and the only such operation in China capable of designing both engines and vehicles. The other was in Feida, a leading privately owned, independent hot-rolling steel products processor.
CNEI Fund II will continue the firm’s strategy of investing across sectors, according to Schoeter. “We’re looking not so much at sectors as growth drivers. We see several growth drivers for the Chinese macro economy, and we’re looking for companies that benefit from those.”
CNEI will continue to stick to its existing deal size preference, though these allow some considerable flexibility. “Our sweet spot is about $10-30 million,” Schoeter said.

China funds and the regulatory platform

Schoeter also pointed out that, though the firm is watching the RMB fund space closely, it sees no reason to participate beyond its current FIVCE vehicle – which allows it to tap domestic LPs – given the overall immaturity of the PRC LP ecosystem. However, Xiaoyang Yu, Managing Partner at CNEI, is still closely involved in advising the PRC government on the development of its private equity regulatory platform.
With the firm’s preferences and strict process, Schoeter noted that investing CNEI Fund II would probably take two or three years. “We’re very thoughtful investors,” he told AVCJ. “We are not focused on deploying the capital as fast as we can.”
Debevoise & Plimpton served as CNEI’s legal counsel on itsfundraising.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Fundraising
• Funds
• Greater China
• Johannes Schoeter
• Xiao Yang Yu
• CNEI