Fund focus: CDIB’s differentiated middle-market play

A solution came in the form of WeMade Entertainment. Based in Korea, it was the largest developer for Shanda Games, China's top online games publisher. CDIB took an 80% stake, saw revenue increase by more than 100% over a three-year period, and listed WeMade on KOSDAQ in early 2012. The return was 3.3x.

This investment thesis - backing not only Chinese companies but also overseas businesses that serve as proxies for Chinese growth - is the strategy for CDIB's debut Asian fund, which has closed at $405 million. The unit was set up in 2006 and committed capital from CDF's balance sheet. It now has third-party capital at its disposal from fund-of-funds, family offices, sovereign wealth funds, insurers and corporations.

Lionel de Saint-Exupery, president and CEO of CDIB Capital, sees this flexibility as a virtue in a challenging environment. The group pursues particular geographic corridors based on where it has offices - Taiwan-China, Korea-China, the US-China - and seeks to offer portfolio companies more than just a domestic strategy.

"There has been volatility in China and some sectors are grossly overvalued in our view," de Saint-Exupery says. "If we were just doing TMT (technology, media and telecom) and consumer, it would be extremely difficult to put capital to work. We can find value elsewhere, such as advanced manufacturing where China is moving up the value chain."

The two most recent investments fit this remit: Huatong Industrial, a furniture manufacturer that supplies leading retailers in the US and Europe and is launching its own brand in China; and Jiangyin Tongli Optoelectronic Technology, which makes protective films for the screens flat panel devices like smart phones.

Two earlier deals - online-to-offline furniture retailer Meilele and specialty beverage retailer The Coffee Bean & Tea Leaf - were warehoused ahead of the fundraise. It was because of these transactions, and the desire not to be diluted, prompted LPs to imposed a hard cap of $400 million, below the original target of $500 million.

CDIB targets businesses with enterprise values of $100-500 million and writes equity checks of $25-75 million. In this space, de Saint-Exupery notes, direct rivals are scarce.

"There are large pan-regional funds covering a similar footprint and with similar ideas, but they are looking for much bigger fish," he explains. "In our weight class, the competitors vary because they tend to be single-country players, and we can do more in terms of institutionalizing them and helping them go cross-border."

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

• Topics
• Fundraising
• Greater China
• GPs
• CDIB Capital
• Fundraising
• Asia
• China
• GPs