CITIC raises fourth-largest-ever China-focused fund

Among domestic managers only Baidu Capital, Boyu Capital and China Development Bank have raised larger vehicles.

CITIC Capital has held the final close on its largest dollar-denominated fund, the fourth-largest pool of capital ever raised for China by domestic firms.

The Hong Kong-headquartered firm collected $2.8 billion for CITIC Capital China Partners IV, $300 million above target, according to a statement. Fund IV is nearly 80 percent larger than its $1.58 billion 2016-vintage predecessor.

A majority of capital commitments in Fund IV came from existing investors, according to a spokeswoman for the firm. It is understood Lazard advised on the fundraise.

Baidu CapitalBoyu Capital and China Development Bank are the only other domestic players to have raised larger China-focused funds. Boyu’s 2018-vintage Fund IV is reported to have raised $3.6 billion as of March, while Baidu raised 20 billion yuan ($3 billion; €2.7 billion) for tech-focused Baidu Capital Fund I in 2016 and CDB raised 18 billion yuan for its CDB Development Fund in 2012, according to PEI data.

Sovereign wealth funds, pension funds, insurance companies, family offices and funds of funds made up Fund IV’s investor base. Canada Pension Plan Investment Board, an existing investor of CITIC Capital, committed $260 million and Brederode SA invested €17.1 million, according to PEI data.

North American and Chinese LPs made up more than 70 percent of the firm’s LPs. Asia-Pacific (excluding China) investors accounted for 22 percent and European and Middle-Eastern LPs 8 percent, according to the firm’s website.

Capital raised for Fund IV follows the same strategy as its predecessor, targeting control buyout opportunities as well as cross-border investments in consumer, healthcare, TMT and industrial sectors.

The firm is focusing on a “China buyouts 2.0 strategy” – employing Western know-how on buyouts and localising and adapting this to Chinese founder-led companies – Yichen Zhang, CITIC Capital chairman and chief executive, told PEI in May last year.

CITIC has completed two deals from Fund IV, including e-commerce company Hangzhou UCO Cosmetics and supply chain pooling solution provider China Merchants Loscam, the spokeswoman added.

China-focused funds collected $22.8 billion last year, the highest amount raised since 2015’s $13.3 billion, while $10.6 billion had been raised as of H1 2019, according to PEI data.

Chinese GPs that are raising dollar-denominated funds include CDH Investments, which is seeking $2.5 billion for its sixth flagship vehicle, and Primavera Capital, which is targeting up to $2.8 billion for its third fund.