Report: Chinese institutions to launch RMB 1bn VC fund

Five institutions will reportedly sponsor almost half of the fund, at least 30 percent of which is to be invested in the Hainan province.

The Nanhua Venture Capital Fund, which is reportedly targeting RMB 1 billion ($146.3 million), will be raised by state-backed Hainan Development Holdings as well as an investment company, a technology company and two university foundations.

Respectively, these are Beijing Jiankun Investment Group; Beijing Tongfang Electronic Science and Technology; Tsinghua University Education Foundation; and Tianjin University Asset Management, according to Hainan Economic Daily.

At least 30 percent of the fund will be invested in Hainan province. The fund will invest in non-controlling stakes of early stage companies, said the newspaper.

Hainan Development Holdings and Tsinghua University Education Foundation will each invest RMB 200 million in the fund. Beijing Tongfang Electronic Science and Technology and Tsinghua University Education Foundation will each invest RMB 20 million, while Tianjin University Asset Management will invest RMB 10 million, the report said.

The remaining RMB 550 million will reportedly be raised from other institutions, although the agreement restricts the number of limited partners to no more than 10. The fund’s manager, Hainan Nanhua Huijin Venture Capital Management, will be set up in Hainan before the end of January and will begin sourcing for deals in the first quarter of 2009.

China has been opening up to private equity. Last month, the capital city of Zhejiang province, Hangzhou revealed plans to launch a private equity incentive package to attract private equity investment.

In May 2008, the Chinese government allowed the National Social Security Fund, China’s largest pension fund to invest up to 10 percent of its assets in domestic private equity funds that were not backed by the state.