CDH targets $1b for second China growth fund

Like its predecessor, the fund will comprise two separate pools of capital: a $500 million US dollar-denominated tranche and around RMB3 billion ($448 million) in local currency. The fundraise was first reported by Reuters and has since been confirmed to AVCJ by sources familiar with the situation.

The private equity firm is also in the market with its sixth flagship US dollar fund. The vehicle launched towards the end of 2017 with a target of $2.5 billion, in line with the $2.55 billion raised for Fund V.

The mid-market strategy is led by CDH’s venture and growth capital team under Lin Wang, one of the firm’s six founding partners. It was established after CDH wound down its venture capital operation while at the same time recognizing that attractive opportunities were being passed over by the private equity team because they fell below the minimum check size.

There was also a desire to double-down on sector expertise. The venture and growth capital team is divided into three segments, covering healthcare, consumer and technology, media and telecom (TMT), respectively. They collaborate with their colleagues working on the main private equity fund, cross-pollinating ideas and looking at opportunities for the main fund to invest in companies backed by the growth fund once they reach a certain size.

The first growth fund launched in 2015, initially with a view to having the US dollar and renminbi tranches operate in tandem, effectively as a single fund. However, restrictions on capital outflows and a slower-than-expected relaxation in the foreign investment approvals process made this approach impractical – a issue that has confronted all China managers pursuing a dual currency strategy.

The fund beat its $600 million target, ending up with around $300 million in US dollars and the equivalent of $500 million in renminbi.

Wang told Reuters that the fund had invested more than $600 million across 30 companies as of the end of 2018, with healthcare accounting for half of the capital deployed. Healthcare portfolio companies include HitGen, a company that develops drugs based on the synthesis and screening of DNA fragments, Huiyi Huiying, which specializes in artificial intelligence-based (AI) medical imaging diagnosis, and Harbour BioMed, a biopharmaceutical player working on treatments for cancer.

The growth fund also backed businesses such as AI technology developer SenseTime, JD.com’s delivery spin-out JD Logistics, and self-service package drop-off and pick-up operator Hive Box.

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• Topics
• Greater China
• Fundraising
• Growth
• Consumer
• Technology
• CDH Investments Management
• China
• TMT