Tsinghua Holdings spin-out holds final close on industrials fund – exclusive

TH Capital held the final close on its third high-end industrial manufacturing fund on 3 billion yuan ($435 million; €372 million) in August, Private Equity International has learned.

The Beijing-based private equity manager, previously known as Tsinghua Holdings Capital,  began fundraising for TH Capital Industrial Investment Fund 3 in the fourth quarter of last year, according to Rafael Ratzel, executive director, head of international business department, at TH Capital.

The fund had a 2 billion yuan original target and received capital commitments from Chinese banks, insurers, funds of funds, strategic investors and national level technology development funds, Ratzel noted. China Development Bank, Industrial and Commercial Bank of China, Pudong Development Bank, SAIC Capital, Tsinghua University Education Foundation and financial services firm Zero2IPO are among its LPs.

Fund 3 is three times larger than its predecessor, the 1 billion yuan Fund 2 which closed in the second quarter of 2016.

The firm is also raising its first dedicated healthcare fund targeting more than 2.5 billion yuan. The dual currency fund is targeting 2 billion yuan to make investments domestically and a further $100 million for overseas acquisitions that will feed into its platform investments in the Chinese market, Ratzel said.

Around 600 million yuan has been raised to date and a final close is expected by the first half of 2019, he added.

TH Capital was set up in 2006 as the private equity investment arm of Tsinghua Holdings, the in-house asset management company of Tsinghua subsidiaries. It spun out in 2012 via a management buyout with Tsinghua University Education Foundation, the endowment fund of the eponymous university, as its cornerstone investor. The endowment remains an investor in TH Capital.

The firm invests through growth capital and buyout strategies across three sectors: high-end industrials, which makes up about more than half of its portfolio, while healthcare and electronic mobility account for the remaining portion. Although it initially made consumer-focused investments, TH Capital has zoomed into high-end industrials in recent years. The firm typically invests between $30 million and $50 million for domestic transactions and can make bigger investments for overseas acquisitions.

TH Capital has over $2 billion in assets under management and employs more than 100 staff across two offices. It opened an office in Munich in August and will launch an office in Boston by year-end as part of its internationalisation plans and to strengthen its overseas deal flow, Ratzel noted.