Report: Chinese state-backed financial sector fund set up

GP Capital, a newly established private equity firm backed by the Shanghai government, is reportedly targeting RMB20bn for a fund focused on China’s financial sector.

Shanghai government-backed investment firm Shanghai International Group and China International Capital Corporation (CICC), a Beijing headquartered investment bank, have obtained necessary approvals from Chinese regulators to set up GP Capital, a private equity joint venture in which both parties have an equal stake, Dow Jones reported.

GP Capital is currently in its initial fundraising round for which it is targeting commitments of RMB8 billion ($1.2 billion; €814 million), Duoguang Bei, chief executive of GP Capital and a managing director at CICC, said in a statement seen by Dow Jones. The fund has a final target of RMB20 billion.

The firm will target commitments from banks, insurance companies and the National Social Security Fund, which was given permission to invest in domestic private equity funds in 2008. The fund will invest in banks, brokerages, insurance companies, mutual fund firms and trust firms in China, Bei said.

The Chinese government has backed a few such funds in the last few years in an attempt to promote domestic private equity, though this is the first fund focused on the financial services industry in the country. The creation of such firms is part of a trend in the country whereby provincial or municipal governments are venturing into private equity fund management, either on their own or in partnership with private entities.

Perhaps the most well-known fund of this kind is the Bohai Industry Investment Fund, China’s first domestic, RMB-denominated private equity fund. The fund was established in December 2006 to invest in Tianjin’s Binhai New Area. It is targeting eventual commitments of RMB20 billion.

Only last month, it was reported that Beijing-based Fortman Fund, another government-backed private equity firm that was established in February 2009, is raising capital for two China-focused private equity funds, each targeting commitments of RMB4.5 billion.

GP Capital, CICC and Shanghai International Group did respond to a request for comment.