Report: CITIC Securities to set up PE business(4)

The brokerage arm of the China International Trust and Investment Company has reportedly received approval to invest around 15 percent of its net assets in private equity.

Hong Kong-based CITIC Securities — a subsidiary of the China International Trust and Investment Company, one of the largest investment arms of the Chinese central government — has received state approval to set up a private equity business on a trial basis, according to the China Securities Journal.

The brokerage will spend Y831 ($110.5 million, €79 million) to set up the unit, and will invest its own funds. The China Securities Journal quoted an unnamed source at CITIC who said the brokerage will likely be able to invest about 15 percent of its net capital, or Y6 billion, in private equity.

CITIC Securities will be the second CITIC subsidiary in the private equity business.

CITIC’s private equity program started with a $50 million US-focused fund in 2003. The firm later developed a dedicated private equity arm, CITIC Capital Partners. CITIC Capital Partners manages $750 million of committed capital through its three funds: a China-dedicated fund that closed on $425 million in April, a Japan mid-market buyout fund that closed in Y17 billion in February 2006, and two smaller US mid-market buyout funds that closed in 2006 and 2004.

China International Capital Corp, a joint venture investment bank one-third owned by Morgan Stanley, has also won approval to set up a similar program, according to the China Securities Journal. CICC was founded in 1995 by five Chinese and foreign institutions and corporations, including Morgan Stanley.