Middle East asset manager Investcorp eyes up to $550 mln in first China yuan fund

BEIJING, Nov 14 (Reuters) - Bahrain-based alternative asset manager Investcorp is aiming to raise 2 billion to 4 billion yuan ($274 million-$548 million) for its first private equity fund in the Chinese currency, its executive said, to explore buyout opportunities in the country.

Investcorp plans to apply in the next few months for a license with Chinese regulatory bodies that will allow it to start raising funds from domestic institutions next year, Investcorp's co-chief executive officer Hazem Ben-Gacem said.

"I hope over time, we will be more than just a Middle East investor in China. I want us to be perceived also as a local Chinese investor," Ben-Gacem told Reuters, adding that the final fundraising size will depend on investor appetite and market conditions.

Abu Dhabi sovereign investor Mubadala holds a 20% stake in Investcorp.

Investcorp's China fundraising plan comes as business ties between the Middle East and the world's second-largest economy pick up amid the Gulf states' infrastructure, technology and financial push, and Sino-U.S. geopolitical tensions.

Buyers from the Gulf states have announced 13 acquisitions of public and private Chinese targets this year, versus just one during the same period in 2022 and more than any other year since at least 1980, according to data compiled by LSEG.

Investcorp completed its first buyout in China in May, purchasing a controlling stake in Shandong Jianuo Electronics, which provides components used in applications such as electric vehicle power management and battery charging infrastructure.

The deal size was about $100 million, according to a statement by the government in the city of Tengzhou, where Jianuo is based.

Other major transactions by Middle East investors in Chinese firms this year include Aramco's purchase of a 10% stake in Rongsheng Petrochemical for 24.6 billion yuan, and Abu Dhabi government-backed CYVN Holdings' $738.5 million equity investment in electric car maker NIO Inc.

Ben-Gacem said the Gulf region might prove an important source of yuan-denominated capital, as Middle East countries and China settle some trades in their local currencies.

"You have an increasing quantum of renminbi (yuan) sitting within the Gulf Cooperation Council that needs to go back to be reinvested in China," he said.

Sino-U.S. tensions and an uneven Chinese economic recovery have made many U.S. investors cautious about deploying fresh capital in China, complicating money managers' efforts to raise dollars for China-focused funds.

Some private equity and venture funds are stepping up efforts to raise yuan funds. Still, convincing yuan-based investors to commit capital could be challenging amid economic headwinds.

The yuan-denominated capital raised by China-focused venture funds totalled $7.5 billion so far this year, less than half of what was raised last year, while no China-focused buyout funds have been raised yet in 2023, according to data provider Preqin.

Investcorp, which manages over $42 billion in assets, has invested more than $500 million in China. It kicked off its private equity business in China in 2018 by investing in a tech-focused fund backed by China Everbright.

In 2022 it launched a $500 million fund with the Hong Kong-based private investment office of the Fung family, focusing on mid-cap companies across the southern Chinese province of Guangdong as well as Hong Kong and Macau.

($1 = 7.2884 Chinese yuan renminbi)

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