Raised PE Funds up by 150.7%; Buyout funds in the spotlight
PE funds rapidly raised capital during 2007. Despite the slowdown of fund- raising during the first half of 2007, the second half witnessed fast growth and rose 65.9% when compared with the first half. The 64 new funds raised US$35.58B - up by 60.0% and 150.7% more than 2006 in terms of the number of new funds and the amount raised.
The Asia-focused buyout funds were eye-catching. Eighteen buyout funds raised US$15.67B or 44.0% of 2007 total newly raised capital. Eight buyout funds raised US$6.44B during 2006. The new funds and newly raised capital increased by 125.0% and 143.3% year-on-year. KKR raised US$4B for its Asian Buyout Fund. Hopu Fund and Morgan Stanley Asia Buyout Fund each achieved US$1B.
Growth capital funds performed well in raising funds. Twenty-three growth capital funds raised US$8.70B representing 24.4% of 2007's total newly raised capital. The limited partnership became legal for establishing PE funds with the enactment of the modified "Law of the People's Republic of China on Partnership Enterprises on September 1, 2007." This lays the foundation for the Chinese PE fund development. Twelve Chinese local funds, comprising 18.8% of the entire funds, raised US$3.73B. Compared with 2006, the raised annual capital and the newly raised funds rose by 145.9% and 100.0%.
Following in the footsteps of first Chinese industrial fund – Bohai Industry Investment Fund (founded in 2006-end) - another five industrial funds received approval for having established values at RMB56B. The Guangdong Nuclear Power and New Energy Fund, Shanghai Financial Fund, Shanxi Coal Fund, and Sichuan Mianyang High Technology Fund, and Sino-Singapore Hi-tech Industry Investment Fund received approval.
The direct investment funds under securities companies kicked off operations: China International Capital Corporation (CICC) and Citic Securities were entitled to conduct direct investment. With the promulgation and improvement of laws and regulations, Chinese PE investments face good opportunities for development. The strategic distribution of Chinese PE investment represents a diversified pattern. On one hand, the Chinese PE market witnessed more bridge capital and PIPE deals. Twenty-two bridge capital deals recorded during 2007 showed an increase of 100.0% year on year. The total PE investment in the form of bridge capital comprised 12.4% of the total PE investment during 2007. Compared with 2006, the proportion rose by about 4%. The US$100M bridge capital deals include Carlyle investing in Kaiyuan Century International Hotel Management and Merrill Lynch etc. investing in Guangzhou Hengda Real Estate Group. Twenty-two PIPE investments took place during 2007. Compared with 2006, PIPE investments rose by 15.8%.
