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BIZCHINA / Center
Goldman's China ally plans private equity fund
(Bloomberg)
Updated: 2007-07-13 16:17
Fang Fenglei, who founded China's first investment bank more than a
decade ago, now wants to open one of the country's first independently
run private equity funds, said two people with direct knowledge of the
matter.
Fang, who now heads the Chinese securities venture of Goldman Sachs Group
Inc, is gauging whether regulators will support his plan for a 6
billion-yuan ($790 million) buyout fund.
He aims to take advantage of a partnership law that took effect in June
to set up a fund and he has no plans to step down as chairman of
Beijing-based Goldman Sachs Gao Hua Securities Co, they said.
Regulatory approval would let Fang, 55, tap demand for investment in a
market where $910 million of buyouts have been announced this year,
compared with $9.22 billion in Australia, an economy one-third the size
of China's, data compiled by Bloomberg show. He must win the support from
officials who still direct about 150,000 State-owned companies and who
control the bulk of funding for existing buyout firms.
"Fang has a clear vision of what he wants to achieve," said Vincent Chan,
managing partner of Hong Kong-based venture capital firm Jafco Asia. "The
key question is whether he can diversify his funding as most domestic
funds are raised from State-owned enterprises, which isn't ideal."
Independent private-equity funds in China, such as CDH Investments and
Capital Today, only raise funds offshore. The Bohai Industry Investment
Fund became the first domestic, yuan-based private-equity fund
established in China last year and is being managed by BOC International
(Holdings) Ltd, a unit of China's second-largest bank.
At least six companies are seeking regulatory approval to establish
domestic funds, the people said.
Most domestic yuan funds are still are dominated by a single investor or
organization, said Ludvig Nilsson, the managing partner of Jade
Alternative Investment Advisors, a Shanghai-based investment and advisory
firm focusing on private equity in China.
Setting up as a partnership enables the fund managers to take a greater
share of any profits, which should help attract top-tier investment
professionals, and will help prevent any single investor from directing
strategy, he said.
"The new partnership structure gives clearer separation of power" between
investors and fund managers, he said. It "promotes stricter investment
and exit timetable mandates."
Fang helped New York-based Goldman win an investment banking license for
Goldman Sachs Gao Hua in December 2004, giving the firm a head start over
global rivals in China, where a record $17.2 billion of stock has been
sold this year.
(For more biz stories, please visit Industry Updates)
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