Hillhouse targets $12b for separate buyout, growth funds

A target of $9.5 billion has been set for the buyout fund, designated the firm’s fifth, while $2.5 billion will be raised for the growth vehicle, according to a source familiar with the situation. San Francisco Employees' Retirement System (SFERS) recently disclosed it had approved an aggregate commitment of $75 million to the two funds; a $25 million investment in the growth vehicle closed last month. A separate VC fund is also being raised.

Earlier this year, Hillhouse launched a venture capital arm under the name GL Ventures. The first fund will reportedly be RMB10 billion ($1.4 billion) in size. GL Ventures operates independently of its parent, with a team drawn from Hillhouse's original VC investment operation.

The flagship Hillhouse funds make healthcare, consumer, technology, and services investments globally, but with a focus on Asia. Fund IV closed at $10.6 billion in 2018, securing commitments from a string of North American pension funds, including SFERS.

It remains the largest fundraise in Asia based on final closes, although KKR has already surpassed that figure with its fourth pan-regional buyout fund, which remains in the market. KKR Asian Fund IV had raised approximately $13.1 billion, according to an October filing, against a target of $12.5 billion. The firm is also raising a growth-stage technology vehicle focused on Asia.

Hillhouse, which was founded by Lei Zhang in 2005, has a reputation for flexibility in its investments. It operates across private and public markets, backing everything from relatively early-stage start-ups to mature businesses. AVCJ Research has records of more than 50 Asia-based transactions in the past 12 months, of which two-thirds were growth capital. There were also a handful of PIPE deals and one buyout.

Late last year, the firm has brought together resources for a RMB41.7 billion investment in Gree Electric Appliances. In addition, it participated in a $2.4 billion pre-IPO round for online real estate platform Ke Holdings, made a solo commitment of $830 million to JD.com's health services platform, and led an extended Series A round of $50 million for Deepexi, a smart data services provider that caters to enterprise customers.

In recent years, Hillhouse has displayed a growing appetite for control transactions, typically targeting companies in traditional industries and working with management teams to implement technology-based solutions. The firm employs more than 350 investment and operating professionals. The value creation team, led by a chief innovation architect, comprises operating executives, engineers, and data scientists.

Participating in a webinar hosted by non-profit organization FCLTGlobal in August, Zhang said the most attractive investment opportunities in a post-COVID-19 world involve helping traditional businesses that have been “victims of the creative destruction of technology” play catch-up.

He used a barbell metaphor to describe his areas of interest. At one end there are start-ups focusing on robotics, artificial intelligence, and online technologies that are continuing to see rapid growth despite COVID-19. The other end is populated by companies that are not defined by technology but have the potential to embrace it.

At least 10 Hillhouse portfolio companies have gone public in the past 12 months, of which more than half are healthcare businesses. They include Genor Biopharma, Shanghai Junshi Biosciences, Gan & Lee Pharmaceuticals, Peijia Medical Technology, I-Mab Biopharma, and Venus Medtech.

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• Topics
• Greater China
• Fundraising
• Buyout
• Growth
• Technology
• Hillhouse Capital Management
• Asia
• Fundraising
• TMT