CITIC Securities launches buyout fund
China's CITIC Securities has received regulatory approval to establish its first buyout fund, which will be managed by Goldstone Investment, the brokerage’s direct investment arm.
CITIC Buyout Fund is a temporary name subject to change, the brokerage said in a statement filed with the Hong Kong Stock Exchange, adding that institutional investors will be targeted to participate as LPs in the fund.
Goldstone Investment was incorporated in October 2007 with RMB5.2 billion ($824 million) of registered capital. Shuguang Qi, CEO of the company, told the Shanghai Securities News that its maiden fund will have a corpus larger than that.
The brokerage also said in a separate statement in April that it has received approval for the setting up of CITIC Goldstone Investment Fund, with Beijing Jinshi Shangde Equity Investment Management as the general partner. This made CITIC Securities the second brokerage to win approval to raise and manage third-party capital.
At that time, sources with direct knowledge of the matter told AVCJ that Goldstone would continue to be the direct investment subsidiary of CITIC Securities as well as raising and managing third-party capital, adding that more concrete information on the fundraising may be expected as early as August.
The establishment of Goldstone was a result of a pilot program that awarded licenses to 34 securities companies to allow them to engage in private equity investments. As it stands, most investments must be made from the brokerages' own capital reserves. However, China International Capital Corporation (CICC) became the first securities company qualified to tap third-party investors to raise a $500 million US dollar-denominated fund through its Hong Kong unit.
Last year, CICC also completed the initial close of CICC Jia Tai Private Equity Fund at RMB1.5 billion. The fund is looking for RMB5 billion, and National Council for Social Security Fund and China Development Bank were reportedly potential investors.
"People from domestic financial institutions were not in the private equity sphere before," David Lin, managing director at Goldstone, told attendees of the AVCJ China Forum in May. "However, they will eventually dominate the game in China."
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