CapDyn inks strategic tie-up in China

The European fund of funds has made a full cooperation agreement with RMB fund of funds Diligence Capital in a move to access regional opportunities for their clients.

Switzerland-based fund of funds Capital Dynamics has signed a full cooperative agreement with China-based fund of funds manager Diligence Capital to expand the reach of their respective LPs in the Asia Pacific region, according to a company statement. 

Capital Dynamics will adopt Diligence Capital’s Chinese name when dealing with activities relating to China, while Diligence will operate under the name Capital Dynamics China. 

Having invested in China for almost 10 years, Capital Dynamics hopes the partnership will offer the firm new local understanding and relationships with Chinese GPs, the statement said. The firm currently has teams in its Hong Kong and Tokyo office, which were established in 2007 and 2010 respectively. 

Similarly, Diligence believes the partnership will help to expand its operations in China, as well as bring international expertise to the firm. 

“Capital Dynamics, with its well-established global platform, is the perfect partner with which to expand our operations in China,” Andy Ge, chief executive of Diligence Capital, said in a statement. “The firm’s long-standing international private equity expertise and practical experience in the development of various emerging private equity markets will be fundamental to success in the Greater China region.”

A number of foreign firms have established China-based partners in recent years. In December 2011, Permira, TPG Capital and Kohlberg Kravis Roberts each signed partnership agreements with CDB Capital in a link-up that was intended to provide them with advantageous access to opportunities in China. 

These things are great, but they do have a shelf life. As the partners feel [more] comfortable and have extracted the benefits of the strategic arrangement, there might be a time when the tie-up isn't so helpful.

However, there has been no evident sign of a deal resulting from the agreements so far. Permira’s Asia co-head Henry Chen told Private Equity International recently, “We continue to have a good relationship with CDB. We make introductions, not just for investment opportunities. That was always the intention – it was a non-binding [agreement] and it was the intention to get closer to the CDB team.”

Many strategic partnerships between foreign and Chinese private equity firms are yet to prove themselves, according to a Beijing-based industry source. He explained that misalignment of interests or cultural differences between the firms often mean alliances break down. 

“These things are great, but they do have a shelf life. As the partners feel [more] comfortable and have extracted the benefits of the strategic arrangement, there might be a time when the tie-up isn’t so helpful,” he told PEI.

“It is [even] more of a challenge [when the agreement] is between two standalone entities and each have limited ability to influence the activity of the other. In those instances where there is limited control, how do you ensure that the strategic direction taken by both firms will follow the same trajectory? I think that is hard.”

Capital Dynamics is a Switzerland-based fund of funds, with about $17 billion in assets under management, according to the statement. The firm recently made a number of internal promotions as co-founder Katharina Lichtner revealed she would give up her executive role.

Appointments included the promotion of managing director George Georgiou, who has been running CapDyn's back office for the last six years as head of portfolio servicing, to chief operating officer, shortly after Stefan Ammann was elevated to chief executive last year, a move that allowed co-founder Thomas Kubr to take an executive chairman role. Director Emma Anderson, previously head of finance and accounting, also became chief financial officer earlier this year.