China Private Equity Fund

completed

Project Description: The project involves a proposed US$20 million equity investment by IFC in CPEF, whose objective is to generate long-term capital appreciation by making late-stage equity and equity-related investments in a diversified portfolio of established companies with substantial operations in China. CPEF intends to invest between US$5 million to US$20 million in each company and work with this company to develop international standards of management and governance so that it can be listed in international markets or attract strategic buyers. CPEF will be established as an 8 year closed-end Cayman vehicle with a capital of about US$100 million. A Cayman company will be set up to be the GP of the fund. IFC’s Role: IFC''s strategy in China focuses on promoting development of the domestic private sector through capacity building and enhancing access to diversified sources of financing. We believe this project fits well with such strategy. In this project, IFC plays three important roles that include (1) supporting additional fund raising, (2) advocating international best practice corporate governance, and (3) building sustainable local institution. IFC''s survey of China''s private equity market has identified this team to be the best in the market. Supporting them to raise their first independent fund and achieve further success will enable the management team to raise subsequent funds both in dollars and local currency and thus become a sustainable Chinese institution.Development Impact: The private equity industry in China is underdeveloped. As a result, there is a lack of the private equity financing and management expertise which is needed to help Chinese companies grow and reach maturity. The project will support the development of a viable fund management institution in an area which is relatively new to China through the introduction of sound management practices. The project will provide the combination of equity capital and active post investment support that are scarce in China but which are required to bring Chinese private companies to a standard of governance that would allow them to access the domestic and overseas public equity markets.