Addor raises $241m for second China healthcare fund

Jiangsu Govtor Yida Health Achievement Innovation Venture Fund II spent just two months in the market, despite what Addor described as a "capital winter" for the industry. It claimed that local managers had raised RMB698.8 billion as of November 2020, down 21.98% year-on-year.

LPs in the new fund include government guidance vehicles, state-owned enterprises, high net worth individuals (HNWIs), and corporates. AVCJ Research's records indicate that Getein Biotech and Zking Property & Casualty Insurance, as well as Govtor and Addor itself, are among the investors.

"The so-called capital winter is not because there is less money in the market, but because investors have become smarter. In the past two years, the private equity investment industry has reshuffled at an accelerated pace, and capital is increasingly concentrated in leading institutions. Small and medium-sized groups can no longer raise money because the returns have not met expectations. Investors are voting with their feet," said Yunzhong Shi, founding partner of Addor, in a statement.

A total of $36.6 billion was committed to renminbi funds in 2020, down from $49.6 billion the previous year, according to AVCJ Research. Fundraising topped $90 billion in each of 2016 and 2017, but then plunged by more than half the following year as the government introduced restrictions on how financial institutions could participate in the asset class.

Addor raised RMB1 billion for its debut healthcare vehicle in 2015, primarily relying on contributions from HNWIs. As of January 2020, the fund had invested in 28 small to medium-sized enterprises (SMEs). Two companies – Contec Medical Systems and Sansure Biotech – have gone public and three have been exited via trade sales. Ten more companies are preparing for IPOs.

Fund II will make earlier-stage investments and focus more on technology. Yi Xue, who leads Addor's healthcare investment team, identified two key driving factors: greater investment in healthcare systems, with COVID-19 having exposed the full extent of the needs in this area; and the technological decoupling of China and the US, which will have a significant impact on industrial supply chains.

Addor will also pay closer attention to innovative drug development. Xue noted that Fund I was relatively light in this area because drug developers have long R&D cycles and large capital needs, and they are difficult to exit. However, capital market reforms permitting listings by pre-revenue biotech companies on Shanghai's Star Market have changed the industry landscape. At the same time, more domestic biotech talent is returning to China and founding start-ups.

As of January 2021, Addor had accumulated RMB113.7 billion in assets under management and invested in 957 companies, of which more than 100 are in the healthcare sector. It has seen 205 portfolio companies listed domestically or overseas. The firm manages several fund series that pursue venture, growth, M&A, sector-specific, region-specific, and foreign currency strategies.

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• Topics
• Greater China
• Renminbi fund
• Healthcare
• Fundraising
• GPs
• China
• Addor Capital