
PAG raises $525m for second China growth fund
PAG has closed its second growth fund, which makes middle-market investments – predominantly in China – that fall below the minimum check size for its pan-Asian vehicle at $525 million.
LPs include the Asian Development Bank (ADB), which said it would commit up to $50 million. The fund had a target of $500 million. PAG’s first growth vehicle, which closed at $350 million in 2018, also set out to raise $500 million.
The growth strategy involves taking minority stakes of no more than $50 million, whereas PAG’s flagship fund – the most recent vintage closed at $6.1 billion in late 2018 – typically writes equity checks of $100 million and above with control or co-control a given. They are similar in sector focus around private consumption and there is some crossover in terms of personnel, with buyout team members sitting on the growth fund’s investment committee.
The mid-cap fund because PAG was seeing investment opportunities involving smaller companies, often earlier-stage technology businesses with a lot of upside but also more risk, that simply didn’t fit the remit of a buyout fund. There is some collaboration between the two strategies, notably in healthcare, where the growth team has made numerous biotech investments.
In 2018, the buyout fund made a $580 million investment in Hisun BioRay Biopharmaceutical, but the growth team sourced the deal. This was because BioRay’s parent only wanted to sell a minority stake to support the development of its portfolio of biosimilar drugs. PAG convinced the parent that ceding 58% and implementing market-oriented governance would be in its best long-term interests.
Several private equity firms have launched China growth strategies to address mid-size investment opportunities. Most recently, Trustar Capital – formerly CITIC Capital Partners – launched a growth fund with a target of $500 million. Its most recent flagship fund closed at $2.8 billion in 2019.
CDH Investments closed its first venture growth capital (VGC) fund at $800 million in 2017 and then raised $1 billion for a successor vehicle last year. Both comprise separate US dollar and renminbi pools of capital. They are intended to work alongside the China-focused manager’s main funds, which closed at $2.55 billion and $1.5 billion in the parallel vintages.
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