Hony set for $2.7b close on latest China fund
China-focused GP Hony Capital has raised $2.7 billion for its latest fund, with the formal closing expected to happen next week. The firm reached a first close of $1 billion in late 2015.
The fund - known as Hony Capital Fund VIII - has a main corpus of $2.2 billion plus a separate account worth $500 million, according to a source familiar with the situation. This appears to be roughly in line with Hony's initial target, which was for a $2 billion main corpus and a $600 million side vehicle that would allow LPs to participate in cross-border transactions.
The main corpus was also intended to be split equally between US dollar and renminbi-denominated contributions, although Bloomberg reported that the US dollar share is around 70%. In the past, US dollar funds and renminbi funds operated by the same manager have invested in different deals due to currency convertibility issues and restrictions on foreign participation in certain industries.
Hony is one of several GPs to seek a more equitable structure - with fewer potential conflicts of interest - by leveraging policies announced in Shenzhen's Qianhai Special Economic Zone and the Shanghai Free Trade Zone.
Disclosed LPs include Shanghai Chengtou Holding, a Shanghai-listed property developer, which committed RMB400 million ($62 million). Hony is the second-largest shareholder of Shanghai Chengtou, having acquired a 10% stake in the company for RMB1.8 billion in 2013.
Speaking at Hony's annual general meeting last year, CEO John Zhao identified state-owned enterprise (SOE) reform, healthcare, food and beverage, media and entertainment, cross-border strategies and the convergence of old and new economies as key themes. A significant portion of the new fund is expected to be deployed in SOEs that need to be reorganized in both private and public markets.
Hony closed its fifth US dollar fund at $2.36 billion and collected a total of RMB10 billion ($1.6 billion) for its second renminbi fund in 2012. Each fund was twice the size of its predecessor. As of last September, the fifth US dollar fund had committed $2.16 billion across 18 companies. Its IRR was recorded as 30% in June.
The new fund will be the largest China-focused US dollar vehicle ever raised by an independent GP, exceeding CDH Investments' fifth fund, which closed in early 2014 at $2.55 billion.
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