CIC再投15亿美圆给私募基金 private, accounts, Investment, 私募基金, 2010

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China fund in private equity push
By Martin Arnold in London

Published: February 17 2010 23:05 | Last updated: February 17 2010 23:05

China Investment Corp, Beijing’s sovereign wealth fund, has agreed to invest $1.5bn in the private equity secondary market through custom accounts with three of the biggest specialists in buying second-hand buy-out and venture capital fund interests.

Lexington Partners, Goldman Sachs and Pantheon Ventures have each agreed to manage $500m for CIC through special accounts, which are to be kept separate from their main funds, according to people familiar with the agreements.

The move is the biggest injection of capital into the secondary market.

It underlines how CIC is using its size to win special terms from private equity groups, including lower fees and transfer of knowledge on specialist markets.

CIC, advised by Step Stone, Credit Suisse and Parish Capital, has spent a year assessing and meeting about 30 secondary managers.

Some of the biggest secondary private equity investors found themselves unable to take CIC’s money because of concerns about conflicts between the custom account it was demanding and their other investors.

“Splitting portfolios creates transfer pricing issues and there will be winners and losers,” said Jeremy Coller, founder of Coller Capital, the biggest secondary investor.

“We are not clever enough to manage the conflicts.”

Yet private equity executives expect more special accounts. Fundraising for private equity groups fell by 60 per cent last year to a five-year low of $245.6bn, according to Preqin, the research group.

As the flow of money has dried up, the balance of power has shifted to investors.

“The era of big public pension funds and sovereign wealth funds accepting the same terms as smaller investors is over,” David Rubenstein, founder of the Carlyle Group, said.

CIC was created in 2007 to invest $110bn of foreign exchange reserves in offshore investments.

The secondary market has the advantage of allowing CIC to build quickly a more mature and diversified portfolio.

It has traditionally served as an exit of last resort for private equity investors, who are otherwise locked into funds for at least 10 years.

The market has more than doubled in size in a decade.

The credit crisis caused turmoil in the secondary market. Prices fell to deep discounts to net asset values, dissuading many from selling.

However, discounts have narrowed and more deals are expected this year.

CIC and the three secondary groups declined to comment.

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