China Everbright lowers overseas infra fund target

A preference for debt products among Chinese investors has forced the private equity firm to reduce the target size of its debut infra fund from $1bn to $600m.

China Everbright has lowered the target size of its maiden infrastructure fund and is aiming to reach a final close this summer, a spokesman for the asset manager told Infrastructure Investor.

Daniel Hu, managing director of China Everbright’s overseas infrastructure fund department, said: “[Due to] the fact that Everbright Overseas Infrastructure Investment Fund is a first-time fund – and investors’ preference in Asia, particularly in China, is for debt-like products – the initial target size [has been] lowered to up to $600 million.”

Despite this, Hu said the asset manager was “in the legal documentation stage” with insurance firms and wealth management investors from China and Korea in order to secure potential investments.

The fund, launched in July 2017, initially aimed to raise $1 billion. As at the end of 2018, it had raised $400 million, according to China Everbright’s annual report for the year.

“Instead of lingering [in] the fundraising [stage] – which would create dilution impact for earlier investors, given the good performance of the assets – the plan is to focus on asset management and to achieve some realisations in the near future,” Hu said.

He also revealed that the firm is aiming to launch a second overseas infrastructure fund in 2020, with the expectation that current LPs will re-up their commitments. He declined to provide further details.

According to Hu, the Everbright Overseas Infrastructure Investment Fund is targeting a net IRR in the mid-teens.

“[The fund’s] assets are performing well,” he said. “The actual distributions for the past 18 months have far exceeded the target annual yield of 5 percent, driven by the strong operating cash flows of the portfolio companies.”

He added that China Everbright will consider whether to deploy the new capital in the clean energy sector or pursue follow-on investments to expand current assets.

The fund has invested in Albania’s Tirana International Airport; Norwegian public transport operator Boreal Group; and Village Telephone, an optical fibre network in Hong Kong.

The eight-year vehicle is targeting assets in OECD countries with a ticket size ranging from $50 million to $200 million.

Based in Hong Kong, China Everbright manages 62 funds and has a total AUM of $18 billion.

The asset manager told sister publication Private Equity International this month that it was planning to increase its US dollar-denominated assets under management. It said it had made the decision after a tightening of regulations in China dampened its fundraising in yuan last year.