AVCJ China Awards: RMB fundraise of the Year – CDH Investments
CDH Investments did not get into the renminbi fund space as part of the mad rush for heady exit multiples on Chinext. The private equity firm’s involvement dates back to several years earlier and it owes much to China’s regulators restricting offshore corporate restructurings and encouraging investors to stay onshore.
"The exit route through red-chip structures was more difficult and the China Securities Regulatory Commission (CSRC) encouraged us to use the A-share market. Then the National Council for Social Security Fund (NSSF) decided to get into the asset class and CDH and Hony Capital were the first two they picked up," Shangzhi Wu, chairman and managing partner of CDH, told AVCJ earlier this year.
The private equity firm launched its debut renminbi fund in 2008 and received commitments of RMB4.06 billion ($668 million), with the NSSF putting in almost 40%. The fund was intended to be a small complement to the firm's other offerings - the previous year CDH's third US dollar fund closed at $1.6 billion - but the NSSF's participation made it an important consideration.
Two years later, the firm returned to market with a successor vehicle - Tianjin CDH Equity Investment Fund II - and an initial target of RMB5 billion. Despite an increasingly challenging fundraising environment towards the end of the process, the fund closed at RMB8 billion last September. The NSSF's contribution was RMB3 billion.
The pension fund is now CDH's largest single LP across any of its funds - US dollar and renminbi - although the largest single group remains international institutional investors, accounting for about two thirds of the total assets under management.
As to the investment prospects for the new renminbi-denominated fund, Stuart Schonberger, managing director at CDH, notes that "China's potential for economic growth still remains very high and its economic model supports the establishment and development of world-class firms."
He cites pharmaceuticals, real estate, logistics and technology as sectors that are likely to deliver strong returns for PE investors.
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