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Exclusive: Hillhouse targets over $3 billion for new yuan-denominated fund - sources

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09/18/2020 | 01:15am EDT

Private equity firm Hillhouse Capital Group is raising a fund targeting over 20 billion yuan ($3 billion), said people with knowledge of the matter, as it readies itself for opportunities offered by the eventual normalisation of the Chinese economy.

Hillhouse formally began fundraising for its largest-ever yuan fund in recent months, said one of the people. It is unclear when the fundraising will close but typical time frames are six months to over a year.

Details of the fund are reported here for the first time.

The move underscores a revival in private equity fundraising momentum in Asia, after new funds raised focusing on the region dropped to a seven-year low in the first half of the year, as buyout firms scrambled to pare exposure to virus-hit portfolios.

So far in July-September, only a little over $6 billion has been raised for Asia-focused funds, compared with the quarter's five-year average of $46 billion, showed data from Preqin.

However, top private equity firms' track record of landing big-ticket merger-and-acquisition deals and steady returns for their investors hunting yields in a low interest rate environment are helping revive fundraising activity.

Hillhouse is also raising what would be Asia's largest U.S. dollar-denominated fund targeting $13 billion, said separate people with knowledge of the matter.

The dollar fund, the firm's fifth, will comprise around $1 billion for venture investment, $2.5 billion for growth-stage companies and the rest for buyout deals, said two of the people.

Hillhouse declined to comment. The people declined to be identified as they were not authorised to speak to the media.

Hillhouse's fundraising follows U.S.-based KKR & Co Inc, which has raised over $11 billion for its latest Asia fund. Its target is $12.5 billion, sources have said.

Founded in 2005 by Chinese rainmaker Zhang Lei with seed funding from a Yale University endowment, Hillhouse is known for early investments in Chinese tech giants Tencent Holdings Ltd, JD.com Inc and Baidu Inc.

It raised $10.6 billion two years ago for Asia's biggest private equity fund, which invests in the healthcare, consumer, technology and services sectors globally, with a focus on Asia.

The firm won a bid last year to buy 15% of China's largest air-conditioner maker Gree Electric Appliances Inc of Zhuhai for $7.5 billion. It also scored a $6.8 billion buyout of shoemaker Bell International with peer CDH Investments in 2017.

Most recently, it invested in biotech firm i-Mab as well as the initial public offering of online real estate broker KE Holdings Inc.

Hillhouse is looking to develop its real estate capabilities and has tapped ex-Warburg Pincus LLC [WP.UL] real estate veteran Joe Gagnon to lead the efforts, Reuters reported last month.

By Kane Wu and Julie Zhu

Stocks mentioned in the article
ChangeLast1st jan.
BAIDU, INC. 3.66% 134.84 Delayed Quote.6.68%
GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI 0.61% 58 End-of-day quote.-11.56%
I-MAB 0.34% 40.77 Delayed Quote.0.00%
KKR & CO. INC. -0.85% 37.15 Delayed Quote.27.36%
TENCENT HOLDINGS LIMITED 0.35% 566.5 End-of-day quote.50.83%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.19% 6.6534 Delayed Quote.-4.58%
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