Report: Former Credit Suisse banker joins Fortman Fund(4)

Chinese government-backed private equity firm Fortman has reportedly appointed Arthur Zhu as its CEO. Zhu was earlier expected to set up his own private equity firm.

Arthur Zhu, formerly a Beijing-based managing director at Credit Suisse, has been appointed as chief executive officer of Fortman Fund, a Chinese government-backed private equity firm, also based in Beijing, Dow Jones reported.

Fortman declined to comment.

Fortman, which was established in February 2009, is raising capital for two private China-focused private equity funds, each targeting commitments of RMB4.5 billion ($659 million; €464 million), people familiar with the matter told Dow Jones.

According to the firm’s website, one of these funds will target investments in the frontier areas of China that lie along its borders while the other will seek opportunities in urban areas.

The Fortman Border Investment Fund aims to encourage the participation of private capital in economic planning and industrial policy in order to expedite economic development and stimulate business and industry in the frontier regions of China, according to the firm’s website.

The second is a city development fund that seeks to accelerate the urban development process in China by investing in urban and public infrastructure such as water supply, gas supply, electricity, sewage treatment, waste disposal and other related infrastructure. The fund will target low-risk, stable returns on its investments, according to Fortman’s website.

Zhu had joined Credit Suisse from Deutsche Bank in September 2008. At Credit Suisse, he was involved in the bank’s investment banking activities in China such as originating mergers and acquisitions and capital market transactions.

The Chinese government is actively promoting the development of the domestic private equity industry. Cash-rich Chinese institutions are now being encouraged to invest in domestic private equity funds and the government is backing the establishment of local private equity fund managers, particularly in the venture capital space, and often in affiliation with local governments or related bodies.

The increasing popularity of RMB-denominated venture capital funds is reflected in the fundraising numbers for venture capital in China in the first half of 2009. In the first six months of this year, 17 venture capital funds were raised for investments in China, of which 13 or 76.5 percent were RMB-denominated, according to data from Zero2IPO, a private equity and venture capital research provider.

However, most of these RMB funds tend to be smaller than dollar-denominated funds. As such, the RMB-denominated funds raised the equivalent of $402 million, or about 29 percent of the 1.37 billion raised in total.