Hopu Investments raising US$2.5b fund to tap demand for China exposure: sources

[HONG KONG] Chinese private equity firm Hopu Investments is targeting raising up to US$2.5 billion in a new dollar fund to capitalise on the country's state sector reforms and its growing consumer industries, people with knowledge of the matter said.

The capital-raising is the latest in a series by China's homegrown private equity firms and comes as they have increased their dealmaking over the past two years.

China is stepping up efforts to reform its bloated state-owned enterprises by streamlining their activities - a strategy bankers and private equity executives expect will produce a series of spin-offs and divestments.

Hopu's new fund, its third one denominated in US dollars, has already received more than US$1 billion in commitments and is aiming to secure US$2 billion in total by year-end, according to the people. A final close is expected to be reached early next year, they added.

The fund counts sovereign wealth funds including China Investment Corp (CIC) and Singapore state investor Temasek as well as Japan's Mitsui & Co Ltd as investors, said two of the people. The Hong Kong Monetary Authority (HKMA), the city's de facto central bank, and Singapore's GIC , are also among investors, according to one of them.

Hopu declined to comment on plans for a new fund. An HKMA spokesman declined to comment on the details of its investment activities. Temasek, GIC and Mitsui declined to comment. CIC didn't respond to a request for comment.

The sources declined to be named as the fundraising plans were private.

Hopu is one of the longest-established private equity firms in China, founded in 2007 by Chinese rainmaker Fang Fenglei, who is also the non-executive chairman of Goldman Sachs' investment banking China joint venture, and Richard Ong, now head of RRJ Capital.

It joins a list of Chinese private equity firms, which includes Hony Capital and FountainVest Partners, that have raised dollar funds since last year.

International investors have become more interested in China-related opportunities after a period when worries over China's debt levels suppressed their appetite.

And for the Chinese private equity groups, raising funds in dollars instead of yuan enables them to target overseas investments without getting entangled in Beijing's capital controls, while international investors often wish to avoid taking local currency risk.

Reuters reported in October that Primavera Capital Group and Citic Private Equity planned to raise new dollar funds totaling around $5 billion.

Chinese private equity firms have targeted raising US$49 billion in 35 buyout funds so far this year, up from just US$13 billion in 22 such funds one year ago, according to data provider Preqin. The US$49 billion is mainly in US dollars and yuan.

Acquisitions made by Chinese private equity firms globally amounted to US$93 billion since the beginning of 2016, with the number of deals reaching 359, Thomson Reuters data shows.

In July, Hopu led a Chinese consortium in an US$11.6 billion deal to acquire Singapore-listed warehouse operator Global Logistic Properties, in Asia's second-largest private equity buyout.

REUTERS