Capital Today nears $600M fund close

Capital Today, a China-focused private equity fund, announced late last week that it will soon finish raising nearly $600 million for a new fund targeting retail, consumer and Internet-related investments in the world’s fastest growing major economy.

Capital Today currently manages a $280 million fund, raised in 2006, of which $180 million has been invested in 12 projects, says Managing Partner Kathy Xu.

Limited partners in the Shanghai-based fund include the British government and the World Bank.

“The interest of our overseas limited partners in investing in China is not fading but continues to grow, so we haven’t had any difficulties raising capital abroad,” Xu says.

The firm’s portfolio includes video-sharing site, which is trying to copy the success of Google’s in China. Tudou has raised about $85 million in several rounds of funding from Capital Today, General Catalyst Partners, GGV Capital and other investors.

Capital Today is also an investor in Kungfu Catering Management Co., a domestic fast-food chain operator that competes in China with foreign restaurants such as McDonald’s Corp. and Yum Brands Inc.’s KFC. Capital Today and Lian Dong Investment Corp. invested more than $40 million in Kungfu Catering last fall.

The announcement by Capital Today that it is nearing a $600 million close comes as global private equity firms, such as The Carlyle Group and Warburg Pincus, have been expanding their investments in China to take advantage of the country’s double-digit rates of economic growth and to diversify their holdings as the U.S. economy reels from a credit crunch.

“Everybody is coming to China, so the competition here these days is getting more and more fierce, and this forces you to work very hard for six or even seven days a week,” Xu says.

“There is too much money and few good projects,” she says, adding that both investors and entrepreneurs were becoming increasingly impatient about striking deals.

Also last week, Legend Capital, an investment arm of China’s Legend Group, announced that it has raised $400 million for a new private equity fund which will be invested mostly in the technology, media and telecom sectors.

Despite the many firms that are investing in China, some have complained that the going is especially tough in China, where private equity-owned companies face difficulties securing government approval for a public listing on the domestic stock markets, eliminating a key avenue used in other countries to exit investments.

George Chen and Helen Ding are Thomson Reuters reporters.