Report: Fang to set up $2bn fund with Temasek

Goldman Sachs Gao Hua Securities chairman Fang Fenglei will manage a $2 billion fund in partnership with Singapore’s sovereign wealth fund, in addition to the Chinese state-backed $677 million domestic fund he was revealed to be involved with earlier this week.

Goldman Sachs’ partner in China, Fang Fenglei, looks to be assuming a central role in the country’s developing private equity industry. In addition to his role at Goldman Gao Hua Securities and running a separate, Chinese state-backed fund, Fang is now setting up a $2 billion (€1.4 billion) private equity fund in partnership with Singapore’s sovereign wealth fund Temasek Holdings, according to The Wall Street Journal.

Temasek, which currently manages more than $1 billion of investments, will reportedly put up $1 billion for the fund, and smaller investors will commit the remaining $1 billion. The fund will invest in state-owned enterprises.

Fang heads joint venture Goldman Gao Hua Securities, and is widely known as a Chinese rainmaker. PEO first reported in August that Fang was seeking government approval for a $4 billion buyout fund, to be denominated half in yuan and half in US dollars. He has said that he has no plans to step down from his post at Gao Hua, though the Journal reports that he will have a smaller role in day-to-day activities.

Earlier this week, details emerged about a recently approved, domestic Chinese fund Fang will lead. His investment company, Hope Investments, is set to manage the RMB5 billion ($677 million, €463 million) China-Singapore Hi-Tech Industrial Investment Fund in partnership with state-backed firm Suzhou Ventures. That fund will target enterprises in the Yangtze delta region, especially in Suzhou Industrial Park (SIP), with a particular emphasis on IT and biomedical companies. The Suzhou government will back the fund, along with local insurance companies and banks.

The Chinese state approved the country’s first domestic private equity fund, the RMB20 billion Bohai Industrial Investment Fund, one year ago. That fund was followed by the RMB20 billion Shanghai Financial Fund, the RMB10 billion Guangdong Nuclear Power and New Energy Fund, the RMB10 billion Shanxi Coal Fund and the RMB6 billion Sichuan Mianyang High Technology Fund.

Though China’s domestic private equity funds are multiplying, they are unlikely to pose a significant competitive threat to foreign firms in the country, an industry source told PEO. The funds are backed by the Chinese government or local limited partners, and most target state-owned enterprises in industries of strategic importance, the source said.