TPG, CICC establish dual currency China investment platform

The China Synergy platform is still in its early stages and the two firms have yet to clarify how it will be funded – as a stand-alone entity or from existing pools of capital managed by the participants.

The dual currency structure is intended to give the platform flexibility to address China-related investment opportunities overseas as well as in the domestic market. Target companies are likely to be international businesses with aspirations to enter the China market or Chinese groups looking to grow with global support.

"This represents a powerful opportunity for TPG to expand our presence in the country. The platform is complementary to our existing business, and it is a solid step in our journey to build on our offerings to fast-growing Chinese companies at all stages," said Tim Dattels, TPG's Asia co-managing partner, in a statement.

Several global GPs, including TPG, won the right to raise renminbi-denominated funds in 2009. They wanted to avoid the lengthy approvals process and restrictions on participation in certain industries that hinder foreign currency investors. However, Chinese regulators decreed in 2012 that foreign-invested renminbi funds shouldn't qualify for local treatment and the initiative lost momentum.

In recent years, some local private equity firms have launched dual currency funds, but it has proved difficult to make a US dollar tranche and a renminbi tranche operate in tandem. The former is unable to participate in certain local deals, while the latter is held back by restrictions on capital outflows. As a result, the pace of deployment and performance might not be in sync. It is unclear how the TPG-CICC platform will address this issue.

CICC was formed in 1995 by Morgan Stanley and China Construction Bank as a joint venture investment bank. In addition to investment banking, it offers equities broking, fixed income clearing, wealth management, and investment management services, with CICC Capital serving as the firm's flagship global PE platform. TPG is a shareholder in CICC having joined a consortium that acquired Morgan Stanley's 34.3% stake in 2010. The company listed in Hong Kong in 2015.

TPG raised its first dedicated Asia vehicle in 1994 and is currently in the market with Fund VII. As of last month, it had raised $4.4 billion with the hard cap set at $5 billion. Lexington Partners recently backed a GP-led tender offer for TPG's fifth and sixth Asia funds, taking out existing positions held by LPs and committing new capital to Fund VII.

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• Topics
• Greater China
• Fundraising
• Renminbi fund
• China
• TPG Capital
• CICC