Carlyle, Fosun to jointly launch yuan denominated fund

09:24, February 25, 2010      

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US private equity giant Carlyle Group and Fosun, China's largest privately owned conglomerate, announced Wednesday in Shanghai that they will jointly launch a yuan-denominated private equity fund.

The fund will be co-branded with the names of both firms. It will be Carlyle's first co-branded fund in the Chinese market.

The initial investment of $100 million will come from the two firms, and will be immediately available to launch the yuan-denominated fund, which will target high growth companies. The two firms will look to collect capital from local Chinese investors to shore up subsequent yuan-based funds, accord to a statement released by Carlyle Wednesday.

Each firm will invest $50 million, according to Zhou Hongqi, director of China Communications for Carlyle Group.

Fosun currently manages many funds for domestic investors. The company invests in many industries including pharmaceuticals, property development and steel.

Carlyle also signed a memorandum of understanding with the Beijing government in January to register a yuan-denominated fund of $5 billion yuan ($732.28 million) there. The planned fund will be managed by Carlyle Asia Partners and will focus on larger investments, Carlyle said in the statement.

Carlyle has invested over $2.5 billion in China in more than 40 deals, the company said in the statement.

Prior to this cooperation, the two firms jointly invested in September in Guangdong Yashili Group Co, a giant infant formula company in China.

"China is one of the best places in the world to invest. By working with local partners like Fosun, we expect to make investments that benefit high growth companies and enhance the local private equity industry," David M. Ruben-stein, Carlyle Co-founder and Managing Director, was quoted as saying in the statement.

Such yuan-denominated private equity funds help enrich fundraising channels for enterprises in rapid growth stages, said Lu Zhengwei, a senior economist at Industrial Bank.

By launching yuan-denominated funds, global private equity firms like Carlyle can enhance their investment capability in China, as offshore funds are only allowed to engage in limited business, Zhou said.

While agreeing that yuan-denominated funds are good for rapidly growing domestic companies, Lu also warned that the investment scope should be strictly restrained, to prevent funds from flooding into sensitive capital markets.

Source: Global Times
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