France-headquartered Cathay Capital Private Equity would consider raising a dedicated impact fund in response to pressure from some of its investors.
The firm held the final close on Cathay Innovation Fund II on €650 million last month, exceeding its €500 million target and more than doubling the firepower of its 2016-vintage Fund I, founder MingPo Cai told Private Equity International.
Cathay has €3.5 billion of assets under management across 14 private equity funds, including global mid-caps, Asian renewable energy and North African technology, per its website. The innovation fund series targets Series A through to Series D funding rounds across China, the US, Europe and South-East Asia.
Private Equity International caught up with Cai to discuss the fundraise and the firm’s close relationship to corporate investors.
What was the composition of Fund II’s LP base?
Two-thirds of our fund was from existing LPs and one-third was new; these were all existing LPs in our other funds but new to the Innovation funds. The majority of our LPs were still European.
Bpifrance is our historical sponsor and we have all the major French banks and insurance companies as LPs. We had some new corporate LPs this time, including L’Oreal, Unilever, Sanofi, Accor Hotels and Decathalon, and existing ones like BNPP, Total, Valeo and Groupe ADP. Fifteen percent of total Cathay AuM comes from corporates investors [and] one-third of Innovation II AuM.
Cathay has a large proportion of corporate LPs. How does this relationship work?
Sometimes people say to us: ‘You’re not experts in mobility, energy, healthcare, so why did L’Oreal invest?’ Corporate funds use us to capture information: we have a great system to share knowledge with our LPs, which means they can access our global portfolio and all the insights we’ve gathered. Every month, we have a dedicated team that meets with their VC or M&A or business development teams and becomes their third eye for understanding the world.
One very important thing we bring corporates is impact and ESG. We just hired Matthieu van der Elst, the former CEO of Michelin Ventures, to be our chief impact officer. All of these corporates want innovation, knowledge and to make sure we do things properly, with impact. In our existing funds, we measure the social and environmental impact for every deal.
Would you consider a dedicated impact fund?
Yes. Some LPs are pushing us in this direction.
MingPo Cai is founder and president of Cathay Capital, having launched the firm alongside Edouard Moinet in 2007. Cai, who is also a member of the World Economic Forum, has more than 20 years of cross-border investment experience.