Fund focus: CIC fund sees upside in trade chaos

Escalating US-China trade tensions and the UK’s protracted divorce from the EU appear to inspire nothing but grievances from industrialists, economists and investors alike. But that doesn’t mean no one is being opportunistic. 

In private equity, the most recent program to take advantage of new global trade dynamics is the China-Ireland Technology Growth Fund, a joint venture between China Investment Corporation (CIC) and the state-controlled Ireland Strategic Investment Fund (ISIF) that invests in emerging areas such as internet-of-things and artificial intelligence. CIC and ISIF are currently setting up their latest cross-border fund at EUR150 million ($186 million), which almost doubles the size of their debut vehicle in 2014, given exchange rate changes.

Fund II, like its predecessor, will be jointly managed by Dublin-based Atlantic Bridge and Beijing-based WestSummit Capital. The larger corpus is expected to allow for later-stage investments. The fund is also tipped to lean more toward European companies outside of Ireland and Chinese companies seeking to enter Europe with an Irish base. “The Chinese ecosystem is deeper, with key strengths in semiconductors and B2C opportunities, and Chinese firms are now expanding into international markets more aggressively,” says Fergal McAleavey, ISIF’s head of private equity. 

These strategic pivots are largely a response to the geopolitical shifts experienced in the four years since the establishment of Fund I, including the pending emergence of Ireland as the only English-speaking country in the EU. “We’re seeing increased willingness to cooperate between a number of European countries and China from a governmental standpoint, and an opposite trend in the US, especially around technology,” says David Lam, a general partner at Atlantic Bridge. “While we strongly believe the UK will be a major global innovation hub, we’re already seeing some migration out of the country as a result of Brexit.”

Lam worked on Fund I as a director at WestSummit but left the firm in 2016. He joined Atlantic the same year, taking up responsibilities for Fund II and leveraging his existing relationships in the China-Ireland program. He led Fund I’s investment in Movidius, a US microchip company that was acquired by Intel for a reported $400 million after becoming a critical supplier of collision-avoidance technology for Chinese drone leader DJI.

In light of the recent friction between the US and China over semiconductor-related transactions, Fund II is likely to ramp up its activity around Movidius-style chip makers in Europe as well as Chinese partnerships in the EU’s relatively welcoming technology space.

“Investors used to be able to just let the politicians be politicians, but now you have to react to what’s happening because developments such as CFIUS [Committee on Foreign Investment in the United States] blocking overseas investments in the US, US tariffs on Chinese goods and China’s retaliatory tariffs impact your day-to-day,” says Lam. “The rising tensions are not in our control, but there’s a bit of addition-by-subtraction working in our favor right now as we take European companies into China and vice versa.”

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• Topics
• Greater China
• Europe
• Venture
• Technology
• Fundraising
• China
• CIC
• TMT