Buhuo Ventures completes renminbi fund restructuring

Four assets were transferred from the firm's debut renminbi fund and an associated special purpose vehicle to the US dollar fund. They include construction equipment rental platform Zhongneng United, online hot pot ingredients supermarket Guoquan, and auto parts supplier New Carzone, according to a statement.

The US dollar fund received commitments from fund-of-funds in Asia and the US, as well as from Asian family offices. The term of the new fund is six years. The multiple on invested capital (MOIC) already exceeds 1.5x and three portfolio companies are expected to launch IPO processes within the year.

Founded in September 2017, Buhuo currently has about RMB2 billion ($308 million) in assets under management. It focuses on supply chain innovation, from sourcing raw materials to sales to end-users.

Renminbi-to-US dollar fund restructurings have become increasingly prevalent in China as managers look to leverage existing portfolios to build support from international investors. The likes of Loyal Valley Capital and Kinzon Capital have completed transactions in recent years, with numerous others said to have taken place under the radar.

Extracting assets from a renminbi fund and placing them into a new US dollar vehicle typically involves a restructuring of the underlying assets. This can be costly and time-consuming. It might be necessary to establish variable interest entity (VIE) structures or joint ventures so that offshore investors can have access to the underlying companies.

Last year, IDG Capital took a different approach by shifting assets from one local currency vehicle to another backed by offshore investors. The investors participated through the Qualified Foreign Limited Partner (QFLP) program.

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