HighLight updates final close timeline for China healthcare fund
HighLight Capital, a Chinese life sciences investor, has pushed out the final close on its fourth US dollar-denominated fund to the third quarter amid challenging fundraising conditions for the industry.
A final close was expected by the end of last year but the process has taken longer than expected because LPs asked for more time to finalise their strategies and budgets, Steven Wang, Highlight’s founder and CEO, told Mergermarket, AVCJ's sister title.
The fund launched in March 2022 and a first close of USD 530m came in the third quarter of that year, with existing investors accounting for 85% of commitments. The target is USD 650m.
Speaking on the sidelines of the Hong Kong Venture Capital & Private Equity Association's (HKVCA) China summit, Wang said the re-up rate was now 90%. He added that HighLight has attracted new LPs from Europe, Southeast Asia, and the Middle East. Asante Capital is serving as placement agent for the fundraise.
Overall commitments to US dollar China funds stand at less than USD 500m year-to-date, according to AVCJ Research. The 12-month totals for 2021 and 2022 were USD 20.9bn and USD 19.5bn. Uncertainty around geopolitics and domestic regulation have made LPs wary of the market, with some saying the risk-return trade-off doesn’t work in the medium term.
Renminbi fundraising is also difficult for independent managers, but Wang noted that HighLight reached a final close of CNY 3.1bn (USD 436.9m) on its fourth local currency fund in the second quarter of this year. The vehicle launched in early 2022 with a target of USD 2.5bn.
HighLight has already deployed more than USD 100m from its latest US dollar fund and it expects to put another USD 100m-USD 150m to work by year-end. Investment periods typically last three years, with 10% of the corpus held back for follow-ons, said Wang. Most of Fund IV will be invested in China, although the firm will be conservative in its approach.
“US-China geopolitical tensions will continue to be the headwind for the foreseeable future and we need to face this reality. For our firm, that means we will continue to focus on our home country (China) by understanding, complying with, and serving its development strategy,” Wang explained.
“Instead of pivoting our investment focus away from China, we will continue to optimize our execution and take a prudent approach in terms of expansion, both on a fund strategy level and a team development level, in order to develop long-term resilience.”
HighLight’s recent investments include Indonesia-based biopharmaceutical company Etana Biotechnologies Indonesia, Chinese industrial autonomous robot manufacturer Standard Robots, and GenScript ProBio, a contract development and manufacturing organisation (CDMO) under Hong Kong-listed GenScript Biotech.
Founded in 2014, Highlight has more than 55 employees across four offices in Hong Kong and mainland China. The firm has deployed nearly USD 1.6bn to date and generated cash distributions of USD 1.5bn, according to Wang.
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