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Report: China Goldman spinout makes first investment – in Mongolia

The investment firm founded by Goldman Sachs executive Fang Fenglei has made a $300m private equity investment in partnership with Singapore’s sovereign wealth fund, Temasek Holdings.

Chinese private equity upstart Hopu Investment Management, founded by Goldman Sachs executive Fang Fenglei, has reportedly made its first private equity investment.

The firm has invested $300 million (€193 million) in the owner of a Mongolian ore mine, according to Bloomberg News, which reportedly viewed a document related to the transaction.

Hopu has joined with Singapore’s $120 billion sovereign wealth fund, Temasek Holdings, to purchase three-year convertible bonds in the mine’s operating company, Hong Kong Lung Ming Investment Holding. The bonds will pay 10 percent interest.

Hopu will invest between $150 million and $200 million with Temasek providing the remainder. Projected annual yield on the investment is between 25 percent and 35 percent. Lung Ming is planning an initial public offering in Hong Kong this year, according to Bloomberg.

Hopu and Temasek are joined in their investment by Los Angeles-based private equity and venture capital firm Clarity Partners and global investment bank Credit Suisse Group, according to the document obtained by Bloomberg. Clarity invested $20 million in June 2007 and Lung Ming raised $110 million from an investor group including Credit Suisse in October 2007 by selling convertible bonds.

Fang previously ran Goldman Sachs’ China joint venture, Goldman Gao Hua Securities, giving up day-to-day duties last year while remaining on as chairman. He founded Hopu in 2007, reportedly setting up a $2 billion private equity fund earlier this year in partnership with Temasek, which committed $1 billion. Temasek did not reply to requests for comment by press time. Goldman Sachs injected $300 million into the fund as well according to media reports in January.

Hopu Investments is additionally setting up a RMB5 billion ($677 million, €463 million) China-Singapore Hi-Tech Industrial Investment Fund in partnership with state-backed firm Suzhou Ventures. That fund will target enterprises in the Yangtze delta region, especially in Suzhou Industrial Park, with a particular emphasis on IT and biomedical companies. The Suzhou government will back the fund, along with local insurance companies and banks.

Goldman’s former co-head of investment banking in China, Richard Ong, abandoned his post earlier this year to join Hopu as chief executive. Ong was denied a promotion to head Gao Hua Securities in July 2007 after failing a mandatory Chinese-language proficiency exam.