China’s CIC plots $1.8bn fund for Japanese SMEs

Sovereign wealth fund China Investment Corporation has signed a deal with Japan’s largest financial institutions for an up to $1.8 billion industrial fund.

Investors in the Japan-China Industrial Cooperation Fund include Nomura Holdings, Daiwa Securities Group, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group, according to a statement from Nomura.

It is expected to raise between ¥100 billion ($890 million; €780 million) and ¥200 billion, a a Nomura spokesman confirmed with Private Equity International. The amount each limited partner will invest into the fund is to be discussed and not yet finalised.

Capital from the fund will be used to back Japanese companies seeking to expand their businesses in China, as well as Chinese companies and companies from other third-party countries, the statement noted.

Nomura, Japan’s biggest brokerage and investment bank, will manage the fund, it is understood. The fund management company is awaiting regulatory approvals in China and Japan.

Nomura relaunched its private equity unit in November last year and seeded an initial ¥100 billion of its own equity capital to revitalise Japanese small and medium enterprises. The unit is unrelated to the fund with CIC, the spokesman noted.

CIC has established similar vehicles before. It teamed up with Goldman Sachs in November for a $5 billion private equity fund that will invest in manufacturing, industrials, consumer and healthcare companies in the US. Goldman and CIC will invest a combined $1.25 billion, while the remaining amount will come from external investors, as previously reported by PEI.

CIC also has existing cross-border funds with Russia and Ireland, among others. Its Russia-China Investment Fund, set up in 2002 alongside Russia Direct Investment Fund, has $2 billion to invest in Russian and Chinese companies. Last week Saudi Arabia’s sovereign wealth fund Public Investment Fund joined forces with the pair and committed $500 million to the Russia-China Investment Fund, raising its total assets under management to $2.5 billion.

Its two Strategic Investment Funds with Ireland have €250 million of capital for Irish technology companies to invest in the Chinese market.