Hony Capital reaches first close on eighth China fund

The China-focused firm is also raising a $600 million co-investment vehicle for to allow investors to participate in cross-border trade outside of China.

Hony Capital has reached a first close of $1 billion on its latest Greater China-focused fund, Hony Capital Fund VIII, and raised an additional $250 million towards a second close, according to reports..

The fund, which was launched in 2015, has an initial target of $2 billion and comprises two pools of capital – one USD-denominated and the other renminbi (RMB)-denominated – each with a target of $1 billion.

Alongside, Hony is raising a $600 million co-investment vehicle which would enable the firm’s investors to take part in cross-border transactions outside of China.

Fund VIII will focus on investments in China, Hong Kong and Taiwan, with about 50 percent allotted to Chinese state-owned enterprises, as well as private firms undergoing restructuring, transformation, or are encountering financial distress, reports said.

A first close was expected in mid-October last year, according to PEI’s Research & Analytics division.
Representatives from Hony Capital declined to comment.

Hony is backed by Chinese conglomerate Legend Holdings Corporation. The firm currently manages more than $7 billion of assets across eight private equity funds, of which five are US dollar-denominated and three are RMB-denominated, and two RMB mezzanine funds.

Hony focuses on buyouts and the commercialisation of state-owned enterprises providing growth capital to high growth Chinese enterprises in sectors such as construction materials and machinery, pharmaceuticals, consumer goods and retail, financial services, energy and resources, and media and entertainment, according to PEI’s Research & Analytics division.

Limited partners in Hony funds include Chinese conglomerate Legend Holdings, the National Social Security Fund, China Life Insurance, Goldman Sachs, Temasek Holdings and Canada Pension Plan Investment Board.

Founded in 2003, Hony Capital has invested in nearly 80 companies, including UK restaurant chain PizzaExpress, IT service provider Neusoft Medical Systems, Chinese travel firm Tuniu, Australian oil and gas company Santos, and US sports equipment manufacturer STX. The firm has offices in Shanghai, Beijing and Hong Kong.

In October 2015, Hony had raised one of the largest mezzanine funds in China, Mezzanine Fund II, which closed on RMB 2.5 billion ($380 million; €352 million).

To read our September 2012 Privately Speaking interview with Hony Capital's John Zhao, click here.