China's largest pension fund, the National Social Security Fund (NSSF), has given initial approval to two domestic private equity firms following third party due diligence on over 10 firms, an official close to the fund is reported to have told news agency XFN-Asia.
In its current round of investment, the official told XFN-Asia NSSF would commit RMB5 billion ($730 million; €550 million) to private equity, although it was not made clear whether this would be shared between additional firms.
Both Shenzhen Capital Group and Science & Merchants have links to the state: Shenzhen is a venture capital firm affiliated to the Shenzhen government with a reported RMB8 billion in assets under management and Science & Merchants manages a reported RMB10 billion energy investment fund, which was set up by the government of Shanxi province.
In a significant move reported in May, the Chinese government decided to allow the NSSF to invest up to 10 percent of its assets in domestic private equity funds not backed by the government. At the same time, the fund made commitments said to total RMB1 billion each to CDH Investments and Hony Capital.
NSSF could not be reached for comment.