Report: China’s CITIC, NSSF to launch $292m PE fund

CITIC Capital and China’s National Social Security Fund will launch a yuan-denominated private equity fund to invest in state-owned enterprises and industrial sectors.

China’s Y516 billion ($75 billion; €52 billion) National Social Security Fund, mainland China’s largest pension fund, and local investment firm CITIC Capital will reportedly launch a yuan-denominated private equity fund.

The NSSF and CITIC Capital’s parent, CITIC Group, will each commit at least Y1 billion in the new fund, which will invest in China’s state-owned enterprises and industrial sectors, according to Reuters.

Advisory firm and asset manager CITIC Capital invests in private equity, real estate, structured finance and special situations. The firm set up a China-focused, dollar-denominated private equity fund in 2007. The fund currently has $425 million in total commitments, and has invested in some of China’s largest conglomerates, including Harbin Pharmaceutical Group and Fushun Excavator. CITIC’s private equity arm has also raised dedicated funds for Japan and the US.

The NSSF won approval this May to invest up to 10 percent of its assets – around Y50 billion – in domestic private equity funds that are not backed by the Chinese government. The fund has since made commitments of Y1 billion each in funds established by domestic private equity fund managers CDH Investments and Hony Capital, the investment arm of Legend Holdings, the parent company of computer giant Lenovo.

CITIC’s brokerage arm received permission last September to invest 15 percent of its assets in private equity as part of a pilot programme. Earlier this year, the China Securities Regulatory Commission  laid out formal criteria under which securities firms can invest in private equity, and in August the regulator permitted domestic securities firms Huatai Securities and Guosen Securities to invest in the asset class.

CITIC’s various arms have raised several new private equity funds in partnership with outside firms. In August 2007, CITIC Capital teamed up with an affiliate company, Shanghai-based Bright Food Group, to set up a $250 million private equity fund aimed at China’s food industry. In September 2007, the Global Emerging Markets Group and CITIC said they would raise a $1 billion fund to target mineral energy sources in the developing world.