CDH to reach $1b first close on Fund V by February

A member of the LP community told AVCJ that CDH would likely exceed its target but restrict itself to less than the $2.5 billion hard cap. There is said to be strong demand among investors for a piece of the fund. "Once they get the first close done it should be relatively easy to reach a final close," the source added.

The private equity firm's target fund size represents a 37% increase on CDH Fund IV, which closed at $1.46 billion in April 2010. The third vehicle, raised in 2007 before the global financial crisis, came in at $1.6 billion, although it included a supplementary fund that invested alongside the main fund for deals above a certain size.

Hony Capital, usually ranked alongside CDH in the top echelon of indigenous Chinese private equity firms, reached a final close of $2.36 billion on its fifth US dollar-denominated fund in January 2012, having originally targeting around $2 billion. The vehicle was almost $1 billion larger than its 2008 vintage predecessor.

Based on the experiences of other GPs in the region, CDH is likely to see a slight shift in its LP base as re-ups from existing investors are joined by relatively large commitments from new parties, notably sovereign wealth funds. There may also be an effort to dilute the fund-of-funds allocation.

A corpus of $2 billion would give CDH the firepower to step beyond its average investment size of $100 million and deploy $200 million or more should opportunities arise. China is expected to see a greater number of buyout transactions in the next few years and CDH's name has already been linked to two notable club deals: the $510 million acquisition of Luye Pharma, and the $3.7 billion management buyout of Focus Media, although it ultimately dropped out of the latter investment.

As an early mover in Chinese private equity - it spun out from China International Capital Corporation in 2002 - CDH saw a number of highly lucrative IPO exits including China Mengniu Dairy and China Shanshui Cement. The GP's first fund is said to have delivered a return of at least 6x.

CDH has also launched three venture capital funds - the third vehicle reached a first close of $100 million in September 2012 - and two renminbi-denominated funds. The second renminbi fund closed at RMB8 billion ($1.3 billion) in the third quarter of 2012.

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• Topics
• Fundraising
• Greater China
• LPs
• China
• CDH Investments Management
• Fundraising
• LPs