CDC commits $105m to Chinese funds

The UK Government’s emerging markets fund of funds has made commitments to four Chinese funds. It expects these funds to go on to raise a total of $1.7bn from other sources for investment in the region.

CDC, the UK government emerging market investor, has allocated $105 million (€67 million; £53 million) to four domestically-managed Chinese funds.

Brian Lim, portfolio director, is confident that now is a good time for investment in the Chinese private equity market. He said: “Following a period of increasing competition and more expensive assets, expectations for pricing have recently become more rational. There should be some good buying opportunities in this vintage and maybe the next.”

“Despite rapid economic growth in China,” continued Lim, “a third of the population continues to live below the poverty line. Private equity investment has a significant role to play in creating a thriving private sector, creating sustainable employment and homes for China’s increasingly urban population.”

The largest commitment in this round is a $40 million sum earmarked for the FountainVest China Growth Fund, which will give CDC exposure to growth capital investments in the $50 million to $100 million range.

CDC is committing $25 million to Qiming Venture Partners II, which is focused on early stage investments in TMT, healthcare and consumer businesses, while $30 million is destined for the Tripod Capital China Fund II. This fund will invest between $5m and $30m in mid-market companies in Mainland China, focused on manufacturing, environmental natural resources, commercial financing and new materials.

Finally, $10 million is being committed to Legend Capital IV, which focuses on early stage venture capital deals.

In a recent interview with PEO, CDC’s chief executive Richard Laing restated his fund’s goal of helping boost the economies of the world’s poorest nations, in the wake of criticism that it had shifted toward a more commercial focus.

The latest commitments bring CDC’s overall total targeting China to $640 million.  Earlier this month CDC committed almost $150 million to African funds.