Hong Kong-listed conglomerate Fosun International is hoping to build long-term relationships with international institutional investors through its latest private equity vehicle, a source close to the fundraise told Private Equity International.
The $1 billion fund will hold a first close on $300 million in June, media reports said in May, and will invest in European and international businesses that want to expand their operations into China.
Fosun did not respond to requests for comment.
The group joins a growing cross-border trend in China where private equity firms offer help to businesses to expand into or outside of China. Other funds doing the same include a €250 million vehicle managed by A Capital and Mandarin Capital Partners, which is targeting €500 million for its latest fund.
But Fosun is also one of the few examples of a largely RMB-focused private equity fund making a significant effort to approach and raise money from international LPs in a serious attempt to become an institutional-type alternative asset manager.
“[Fosun] is a powerhouse on the RMB fundraising side, but hasn’t really done much in the way of a typical US dollar fund. With the evolution of this market and groups wanting to become Blackstones or Carlyles – Fosun is serious about building an asset management platform that is broader than just the onshore market,” the source explained.
Fosun has previously been involved in raising US dollar-denominated vehicles. The firm raised a $100 million fund with The Carlyle Group in 2010 and a $600 million fund with Prudential in 2011.
Fosun is serious about building an asset management platform that is broader than just the onshore market
A source explains Fosun's $1bn fund will target a set of sophisticated investors new to the firm
The firm now wants to tap foreign pension plans, sovereign wealth funds and other institutional investors to build long-term relationships, but must adapt to international practices in order to appeal to these sophisticated LPs.
As a Chinese firm operating with onshore practices in areas such as fund terms and fund structures, the challenge facing Fosun is to create an offering that appeals to US dollar investors globally. For example, most RMB investors expect a three to five year holding period and a much faster return on invested capital, compared to the five to 10 year investment period LPs are accustomed to in the West.
One placement agent in Asia said LPs could be wary of the cross-border play as it is still a nascent strategy. He said: “If you think through the potential investor base, the strategic investors are going to be the natural fit because the types of deals [Fosun] are doing don’t necessarily fit into a set strategy. It is interesting talking to some of these [cross-border] groups because they don’t know where to place themselves – are they a European group providing access to China or marketing themselves as a China fund? It is a little bit unclear at the moment as to where their strategy is moving.”
However, PEI’s source close to the fund says it is easier for private companies to adapt their strategies to fit international LP expectations than state-owned enterprises in China. “These guys are privately-owned, so in theory, they can be more nimble and [flexible] in terms of how quickly they can adapt that international capability.”