China's Principle Capital hits second close on dual-currency fund

The vehicle launched in the middle of last year and split its first close into two tranches, one of which took place in late 2022 and the other in early 2023, according to a source close to the situation, who did not specify the size. The second close came at the end of June and the overall target remains USD 500m. Principle declined to comment on fundraising.

Fund V is like its predecessor – which closed on USD 350m – in raising US dollars and renminbi together. The goal is to raise equal amounts in each currency with a view to investing in the same deals on a pro-rata basis. However, there is some flexibility to take more of one currency than the other. Funds I through III were renminbi-denominated with an aggregate corpus of around CNY 4bn (USD 554m).

New LPs in Fund V include several global fund-of-funds, the source added, describing Principle’s historical overseas investor base as “regional and then more Europe than the US.” Partners at CD&R, most of whom are US-based, did re-up. The International Finance Corporation (IFC) committed USD 30m to Fund IV but to date, no re-up for Fund V has been disclosed.

Based in Shanghai, Principle was founded in 2002 by Lin-Lin Zhou, formerly of McKinsey & Company, and Zhong-Ren Jing, who previously worked at the American Institute of Research. Zhou remains CEO; Jing is one of two managing partners, alongside Pencia Yin.

In 2016, prior to entering the US dollar space, Principle formed a partnership with CD&R, which offers access to its global networks and operational insights. This was CD&R’s second such relationship in Asia following a tie-up with India’s Kedaara Capital. Nicholas Ng, who joined CD&R last year from China Ping An Insurance Overseas, is described as the firm’s day-to-day point of contact with Principle.

The strategy is unchanged from Fund IV. Principle makes equity investments of USD 20m to USD 100m in the advanced industrial, business services, healthcare, and consumer spaces, favouring companies with relatively high margins, profitability, and cash flow. Distributions to paid-in (DPI) across the first four funds exceed 3x, the source said.

Over the course of Fund IV, the firm started to do more control transactions. One of these, CIMS, was exited last year. Principle carved out the business from Camtek, a NASDAQ-listed semiconductor components supplier with key production sites in China and Israel, for USD 35m in 2017. CIMS develops automated optical inspection tools for printed circuit board manufacturers.

The first investment from Fund V is also a control deal. Principle acquired Accela ChemBio, a domestic provider of chemical reagents and catalogue building blocks to contract development and manufacturing organisations (CDMOs) and contract research organisations (CROs).

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• Topics
• Greater China
• Fundraising
• GPs
• Growth
• Renminbi fund
• China
• Principle Capital
• Fundraising
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