FountainVest launches $1.25bn second fund

The Chinese private equity firm has returned to market after generating strong returns with its debut vehicle, a $950m 2008 vintage.

FountainVest Partners is targeting $1.25bn for its second offering, according to a Washington State Investment Board spokesperson. 

The board, which manages $80.4 billion in investment plans for state employees, committed up to $150 million to FountainVest China Growth Capital Fund II at its meeting Thursday. 

FountainVest’s second fund will employ the same investment strategy as its previous vehicle, which primarily invested in revenue generating, high growth businesses in China. The first fund, which raised $950 million in 2008, was generating a 14 percent net internal rate of return and a 1.2x total value multiple as of 30 September, according to Washington state documents. 

Earlier this year, the firm invested $92 million in die-casting manufacturer LK Technology, subscribing to a combination of new shares, perpetual convertible securities and warrants for a 15.28 percent stake in the company. 

FountainVest was founded in 2007 by Frank Tang, Terry Hu, George Chuang and Chenning Zhao. The firm has offices in Shanghai, Beijing and Hong Kong. 

In addition to FountainVest, Washington committed $200 million to TPG Capital’s debut distressed investments vehicle, which the firm is calling its second opportunities partners fund, targeting $1.5 billion with a $2 billion hard-cap. The fund will invest globally in non-performing loans, distressed-for-control and special situations. Prior to the fund, TPG’s distressed debt team made investments from its main funds, which is why the firm is referring to the new vehicle as TPG Opportunities Partners II. 

The board has committed $2 billion to six TPG funds over the years, including $200 million to TPG Growth Fund II last year. 

Washington made a pair of commitments to real estate funds as well, committing $500 million in a follow-on investment to Principal Enterprise Capital Holdings and up to $250 million to Aevitas Property Partners. 

The board maintains a large private equity portfolio valued at $25.6 billion – 31.8 percent of its total investments.