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Private equity's budding love affair with China has grown even stronger as the country's $74 billion national pension fund allocated nearly $500 million to Chinese buyout shops CDH Investments and Hony Capital.
The National Council for Social Security Fund, or NSSF, placed 2 billion
yuan ($289 million) with each firm continuing the drive by China to put
state-controlled assets to work.
Bloomberg reports that Dai Xianglong, chairman of the NSSF, as saying: "We must step up the expansion of our investment channels to boost returns," Dai said at a conference in the northern Chinese city of Tianjin. "If I only put China's pension money in low-earning deposits, how will I answer to the public?" NSSF is expanding into alternative investments as it seeks higher returns to help extend coverage to more of China's 1.3 billion people as the nation dismantles its cradle-to-grave welfare program. The Chinese pension fund announced last week it received approval to invest up to 10% of its assets in private equity funds. Both CDH Investments and Hony Capital are domestic Chinese private equity firms. Hony Capital is the LBO arm of China-based Legend Holdings Ltd., and CDH Investments is the former investment arm of China International Capital Corp., according to Bloomberg. After decades of keeping its reserves primarily in U.S. Treasuries, China has been aggressively expanding into alternative asset classes. The country's sovereign wealth fund, China Investment Corp., is reportedly in the final stages of talks with eight firms including Goldman, Sachs & Co. and Morgan Stanley for each of them to manage fixed-income funds ranging from $250 million to $600 million. It is also in advanced talks with JC Flowers & Co. LLC regarding the LBO shop managing a $4 billion private equity fund for the sovereign wealth fund. - George White See Bloomberg story See Dealscape post on CIC See Dealscape post on JC Flowers/CIC Categories Deal Video
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