Carlyle seals deal with Beijing for yuan-based fund

The Carlyle Group has signed a memorandum of understanding (MOU) with China to launch a yuan-denominated fund in Beijing, the firm said in a statement last week.

Carlyle, with $87.6 billion in assets under management, signed the deal with the Beijing Municipal Bureau of Financial Work, and said it would invest in larger growth companies. It did not disclose the size of the fund.

“The Carlyle Asia Partners RMB Fund will help expand our investment capabilities in Beijing and across China, further Carlyle’s strategy of localizing our franchise in China and contribute to the healthy development of the local private equity industry,” Daniel D’Aniello, founding partner and managing director of Carlyle, said in the statement.

Large buyout firms, such as Carlyle and The Blackstone Group are racing to launch yuan-based funds in an effort to carry out deals more quickly and easily in China, where approval for major foreign investments is difficult to come by.

Yuan-denominated funds are not without controversy: Private equity executives have promised their investors a slice of China’s red-hot economy, either through global funds or Asia-focused funds. A yuan fund is seen as allowing easier access to Chinese deals, but Beijing forbids non-China investors from taking part.

Global private equity firms can raise yuan funds from super-rich Chinese individuals, Chinese pension funds or domestic enterprises, but these funds are off limits to non-Chinese investors because of the country’s strict foreign exchange controls.

Beijing, which has historically viewed private equity firms as speculators, is becoming more welcoming of foreign funds setting up local units and raising yuan funds to boost their investments, thereby creating more jobs.

In August, Blackstone announced a 5 billion yuan ($732.6 million) fund, making it one of the first Shanghai-registered yuan private equity funds to be launched by a foreign investor.

Other international firms that won recent approval to launch yuan funds include Prax Capital ($220 million), CLSA ($1.46 billion) and First Eastern ($878 million). —Joseph Chaney, Reuters