CITIC to launch buyout, VC funds

CITIC Capital Holdings Ltd., an investment arm of a large Chinese financial conglomerate, plans to launch a buyout fund with China’s national pension fund NSSF, as well as a venture capital fund with China Development Bank, CEO Zhang Yichen said last week.

“We are seeking cooperation with the national social security fund to launch a buyout fund,” Yichen told Reuters.

He declined to disclose specifics.

In 2007, CITIC Capital, controlled by CITIC Group, raised $425 million for a China-focused private equity fund.

China is encouraging private equity investment, seeing it as a new source of corporate funding, as banks become increasingly cautious in lending to the private sector, while the country’s IPO market has dried up amid the global economic crisis.

“We’re looking forward to cooperating with the government, which holds a lot of cash and resources,” said Zhang, who added that CITIC Capital was competing with other private equity firms to win the contract with NSSF.

Sources with direct knowledge of the matter told Reuters earlier that CITIC Group and NSSF, may each invest about $140 million in the planned new fund.

Hong Kong-based CITIC Capital has made some high-profile private equity investments in the past. Its China portfolio includes Harbin Pharmaceutical Group, one of China’s largest drugs firms, and Fushun Excavator Co., the country’s largest manufacturer of hydraulic crawler cranes.

CITIC Capital also plans to launch a venture capital fund with CDB, which is turning itself into a commercial lender from a policy bank that lends in line with government directives, Zhang said. —George Chen and Zhang Shengnan, Reuters