CDH to raise $600m China mid-market fund

A first close of about $300 million is expected by the third quarter of this year, sources familiar with the situation told AVCJ. CDH has not commented on the matter.

There is a perceived gap in China's middle market - for US dollar-denominated funds - as a number of established managers have raised increasingly large funds over the past decade. CDH closed its first US dollar fund at $100 million in 2002. The firm is currently investing its fifth vehicle, which has a corpus of $2.5 billion. The likes of Hony Capital, CITIC Capital and Orchid Asia have also seen size increases.

Between 2001 and 2008, five China-focused funds raised in excess of $750 million; the remaining 140 or so closed on $600 million or below, according to AVCJ Research. Since 2009, 19 funds have closed at $750 million or more. Of the 118 other vehicles reaching final closes, 45 sit in the $250-749 million sweet spot generally seen as middle market or lower middle market. However, over half are VC funds.

Fund sizes have to a certain extent grown in line with China's economy and GPs are following a similar investment thesis but on a larger scale. But CDH is looking at check sizes of around $100 million for its flagship fund, which means many opportunities involving smaller companies cannot be considered.

While the middle market space is not as busy as it once was, certain managers are getting traction - albeit with strategies that offer more than the largely passive, pre-IPO approach previously pursued by many GPs.

In recent weeks, Ascendent Capital Partners, which has a merchant banking-style strategy, reached a first and final close on its second China fund at the hard cap of $600 million after about four months in the market. Meanwhile, CDIB Capital raised $405 million for its debut fund - an Asia vehicle that will make China cross-border investments.

CDH has more than $14 billion under management across private equity, venture capital, real assets, mezzanine and credit, public equities and wealth management. In addition to five US dollar PE funds and three VC funds, the firm has raised two renminbi vehicles, the most recent of which closed in 2012 at RMB8 billion ($1.3 billion), twice the size of its predecessor.

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• Topics
• Fundraising
• Greater China
• Expansion
• Renminbi fund
• CDH Investments Management
• China
• Fundraising
• Renminbi