CITIC Securities targets up to $1.6b for RMB fund
CITIC Securities is targeting RMB5-10 billion ($798 million to $1.6 billion) for its first private equity fund, most of which will come from Chinese institutions, including government agencies. The vehicle will buy stakes in companies involved in M&A processes, essentially facilitating the consolidation of domestic industries.
"Eighty percent of the fund will be used soon after its inception next month as we have many projects in the pipeline," Boming Cheng, president of CITIC Securities, told Bloomberg.
The securities company said in June that the vehicle had been given the temporary name CITIC Buyout Fund. One month earlier, the firm announced that it had won approval to set up CITIC Goldstone Investment Fund, with Beijing Jinshi Shangde Equity Investment Management as the general partner. The will be managed by Goldstone Investment which was incorporated in October 2007 with RMB5.2 billion ($824 million) of registered capital.
At that time, sources with direct knowledge of the matter told AVCJ that Goldstone would continue to be the direct investment subsidiary of CITIC Securities as well as raising and managing third-party capital.
Goldstone was the product of a pilot program that saw licenses awarded to 34 securities companies, allowing them to engage in private equity investment. As it stands, most investments must be made from companies' own capital reserves.
However, China International Capital Corporation (CICC) became the first securities company to tap third-party investors, raising a $500 million US dollar-denominated fund through its Hong Kong unit in 2010. The securities company subsequently launched a renminbi vehicle, CICC Jia Tai Private Equity Fund last year. It reached a final close of $783.3 million last month.
CITIC Securities is controlled by CITIC Group, the Chinese conglomerate that also owns half of CITIC Capital and a smaller stake in CITIC Private Equity.
Asian private equity fundraising reached $10.8 billion in the third quarter of 2012, continuing a downward trend that stretches back 12 months, according to provisional data from AVCJ Research. Renminbi-denominated fundraising experienced the most acute decline, falling to $1.5 billion from $6.4 billion the previous quarter.
If CITIC Securities can successfully tap into the limited pool of institutional money available in China, it is unlikely to be hurt by the downturn in renminbi fundraising. The National Council for Social Security Fund (NSSF) announced that it had committed RMB22.6 billion to 16 vehicles managed by 12 local and offshore GPs as of mid-September. Total capital deployed is expected to reach RMB30 billion by the end of the year.
The NSSF has backed managers including Hony Capital, CDH Investments, CITIC Capital, SAIF Partners, CITIC Private Equity, Bohai Capital and New Horizon Capital.
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