Cathay Capital reaches halfway mark for second China-Europe fund

Bpifrance and China Development Bank are cornerstone investors in the fund targeting a €1.2bn capital raise.

French-Chinese manager Cathay Capital Private Equity held a €600 million first close for its latest vehicle, Cathay Midcap II, against a €1.2 billion target.

China Development Bank, the country’s largest bank for foreign investment and French investment bank Bpifrance are cornerstone investors in the fund, according to a statement.

Sovereign wealth funds, institutional investors and family offices mainly from Europe as well as China and the Middle East also committed capital. The €500 million China-EU Co-investment Fund – established in June 2017 by the European Investment Fund, an EU agency which backs small and medium enterprises, and the Chinese state-owned Silk Road Fund, to support equity investments in Europe – has also backed the fund. Financial details of the commitments were not disclosed.

The firm launched Cathay Midcap II in January during French president Emmanuel Macron’s visit to China. It expects a final close by the first half of 2019.

Capital raised for the fund will be invested in mid-cap companies in China, France, Germany and a small segment in North America. Focus sectors are healthcare, high-end industries, consumer goods and business services. Typical investments will be between €25 million and €75 million.

The predecessor vehicle, Sino European Mid Cap Fund, raised €500 million in December 2014, according to PEI data. Its portfolio includes medical company Echosens, which it sold to European private equity firm Astorg in March this year; food ingredients manufacturer Cabio; and multilingual data company Datawords.

Cathay Capital has €2.1 billion in assets under management, with offices in Beijing, Shanghai, Paris, Munich, New York and San Francisco. The firm is also investing a €200 million Sino European Small Cap Fund, a €250 million Sino-French Innovation Fund and a €350 million North American-Sino Fund, PEI data show.

Hong Kong-headquartered AGIC Capital and Paris-based mid-market manager Idinvest Partners are among other private equity firms, which raise cross-border funds investing in China and Europe.  AGIC Capital recently made its first exit from its 2015-vintage $1 billion debut fund, selling its full stake in German manufacturer KraussMaffei Group to China’s largest chemical group ChemChina. Idinvest, which set up its Shanghai office in 2016, invests across growth capital funds, debt funds, digital, as well as secondaries.