Exclusive: CDH closes $2.55bn China fund

The private equity firm has closed its fifth country-focused vehicle oversubscribed.

Hong Kong-based CDH Investments has closed its latest private equity fund oversubscribed on $2.55 billion – less than a year after its launch, CDH has confirmed. 

The firm revealed to Private Equity International that the final fund documents were signed late on Friday. 

The vehicle, CDH's fifth of its kind, was originally targeting $2 billion to invest in Greater China, with a $2.5 billion hard cap. 

While CDH declined to comment on specifics, a source close to the matter told PEI that the firm went back to LPs to allow a further $50 million into the fund to accommodate the high demand from investors.

Ultimately, the fund closed with around 60 LPs altogether, though some had to be cut out at the last minute. The vehicle would have reached $3 billion had all investor commitments been accepted, the source said.

The new vehicle launched and made a first close on about $800 million in February 2013, quickly raising more than $200 million in commitments shortly after, PEI reported earlier.

“I think it has been a challenging fundraise throughout. [But] the way CDH invests, as an opportunistic investor, people like that and historically the firm has made more money in tougher times than good times and people recognise that,” PEI’s source explained.

LPs in the fund include pension funds, endowments and sovereign wealth funds, evenly split between the US, Asia and Europe and the Middle East. Most of the LPs from CDH's previous $1.5 billion fund re-upped, though the increased size of the new fund allowed the firm to accommodate new investors.

Asia Alternatives, LGT Capital Partners and long-standing supporter of CDH, the Government of Singapore Investment Corporation, are confirmed investors in the vehicle. 

Foreign investors feel increasingly at ease investing into China via country managers, rather than just global or pan-regional funds, PEI's source added. 

“LPs are now getting comfortable investing directly with [China funds] and there are a handful of institutional GPs like CDH who people are comfortable with. It is also from a portfolio construction perspective: [LPs] want to have a direct allocation to China so they know they are getting exposure to China,” which is not the case with a pan-regional fund.

He added that investors stressed that the fund remain focused on China, despite CDH having a 10 percent tranche in the vehicle that allows for opportunistic investment in other Asian countries as long as the deal has a China angle.

CDH has returned over $1 billion to investors over the past 12 months, PEI’s source said, no doubt motivating investors to commit to its latest offering.

It is also planning an IPO in Hong Kong for portfolio company Shuanghui International, the Chinese pork producer that last year acquired US pork maker Smithfield Foods in a high-profile $4.7 billion deal.

The firm declined to comment on the anticipated exit, but media has widely reported that Shuanghui will likely list in Hong Kong in a deal that could be worth up to $6 billion – one of Hong Kong’s largest IPOs in recent times.