Two UK firms have this week signed agreements to launch joint venture private equity funds with Chinese regional government agencies.
UK-based technology investor Rockley Group has agreed with the Shanxi Small and Medium Enterprise Investment Corporation (SSMEIC), the high technology venture fund that is owned by the Shanxi provincial government, to raise a new $100 million fund dubbed Shanxi Zhongying Rockley.
SSMEIC will commit $60 million to the new fund while the Rockley group will invest the remaining $40 million, the statement noted. The Shanxi fund will come under the umbrella of the existing Rockley China Fund, taking the fund’s total AuM to $200 million, and will follow the same strategy in backing established technology companies in the energy, environment, information and communications technology and health and safety sectors.
“The demand for technology solutions to support sustainable domestic economic growth in China will be one of the greatest investment plays of the next few decades,” said Andrew Rickman, Rockley Group’s chairman in the statement. “We have a growing list of investors from Europe, Hong Kong and China who are attracted by this opportunity.”
Last year, Rockley signed a similar agreement to raise a $100 million fund with the Shandong High-Tech Investment Corporation and the Shandong Academy of Sciences. The fund, known as Rockley Luxin, which has since been incorporated as a joint venture vehicle, is also part of the wider Rockley China Fund, which is headquartered in Beijing.
In an interview with PEI Asia last year, Rickman said the spotlight that was previously cast on the US’ technology sector was waning, and that the focus had been moving China’s technology sector in recent years.
“From a UK technology company point of view, in years gone by you’d think to yourself, ‘I need to get to the US’ – that was where the major market was going to be for your technologies. That still remains important to a degree, but I would say now the question is pretty much ‘how do I get to China?’” Rickman said at the time.
Meanwhile, another UK firm to launch a Chinese joint venture this week is Blue Oak Capital, which said in a statement on Thursday it was hoping to take advantage of China’s resilient economy with the launch of a $100 million fund to invest in mid-market companies in China.
The Blue Oak China Venture Fund is an onshore RMB denominated fund, launched in partnership with a division of the Xi’an government, with a life of seven years and a four-year investment period. It plans to seek out early stage growth deals in China’s alternative energy, new materials, environmental protection, consumer products, retail and logistics space.
The fund has thus far been backed with $20 million from UK-based mid market firm LDC. It is structured to allow it to repatriate funds back to Western investors, and is targeting a “25 percent internal run rate”, the statement said.
The Rockley and Blue Oak funds are amongst a number of joint ventures between a foreign investor and a local Chinese authority which have been launched in China this year.
In October, Japanese financial services conglomerate SBI Holdings and China’s Fudan University agreed on a collaboration to establish two China-focused venture capital funds to focus on investments in start-ups in the sectors of biotechnology, green technology, IT, media and alternative energy. One of the funds will be USD-denominated, while the other will be denominated in RMB, an accompanying statement noted without disclosing figures.
Fudan is the third Chinese university that SBI has established a joint venture with. In 2008, SBI formed two USD funds with Beijing University and Tsinghua University, with sizes of $100 million and $30 million respectively.