CITIC PE raises largest RMB fund to date

The Beijing-based firm raised $1.3bn for CITIC Mianyang Private Equity Fund, which counts China's state pension fund as its largest LP.

Beijing-based CITIC Private Equity Funds Management (CITIC PE) has raised RMB9 billion ($1.3 billion; €940 million) for its debut fund, making it the largest RMB fund to be raised in China thus far.

China’s National Council for Social Security Fund is the CITIC Mianyang Private Equity Fund’s biggest single investor, according to a CITIC PE statement. The amount committed by the NSSF was not disclosed.

CITIC PE invests across four sectors: financial services, consumer goods, energy and resources and manufacturing. In the last 12 months it has made 10 investments valued at a total of more than RMB2 billion. The firm’s portfolio companies include Chinese liquor brand Kuaijishan and data services provider Wind Info, the statement noted.

Set up in June 2008, CITIC PE is the private equity platform of state-backed financial conglomerate CITIC Group and securities company CITIC Securities. Liu Lefei, who was appointed CITIC PE’s chairman in early 2009, was previously the chief investment officer and general manager of state insurer China Life’s investment management division. Wu Yibing, CITIC PE’s president, was formerly a managing director at state-backed investment holding company Legend Holdings.

Currently, the firm has more than 60 investment professionals and is able to leverage its networks to source and execute deals, including taking minority stakes in state-owned enterprises.

The CITIC fund is the first of a second batch of five industrial investment funds approved by China’s State Council to have completed fundraising, according to CITIC's statement. Industrial funds from the first batch include the Shanghai Financial Fund, the Guangdong Nuclear Power and New Energy Fund and the Bohai Industry Investment Fund, which was the first to be established. No details on the other funds in the second batch are known.

Despite growing at almost 40 percent annually, the Chinese private equity market remains relatively small compared to the size of China’s GDP. In 2008, the asset class accounted for 0.2 percent of the economy compared to 0.8 percent in the US, the statement noted.

The Chinese government signalled its support for a domestic private equity industry when the NSSF was allowed to invest up to 10 percent of its assets in the asset class in 2008. This year, its assets under management will swell to RMB1 trillion, stretching its private equity allocation to RMB100 billion, Dai Xianglong, chairman of the pension fund reportedly said in October 2009.