Top China outbound investment funds in management overhaul

20 February 2019 - 12:00 am UTC

Two of China’s biggest funds focusing on outbound infrastructure and energy investments, among others, have merged amid a senior management reshuffle.

The USD 10bn China-LAC Industrial Cooperation Fund and the USD 10bn China-Africa Industrial Cooperation Fund (CAFIC) have been undergoing a restructuring process over the last few months and are now incorporated into a new entity, a source familiar told Inframation.

The merger of the two funds was followed by an attempt by their biggest LP – the State Administration of Foreign Exchange (SAFE) – to revamp the management teams in 2H18 which has subsequently seen the departures of several top executives. 

An ongoing organisational revamp will also lead to changes in the funds’ investment mandate, now with a preference for debt investment in the short-to-mid-term, the source said. The funds, which have largely halted equity deals since 2H18, will maintain a more cautious investment approach before the new management team appointed by SAFE familiarise themselves with the markets.

“It will take some time to work out the new investment strategies,” the source added. “That means the funds will slow down on dealmaking this year particularly for greenfield projects such as Brazilian PPPs with higher risks.”   

As a result of the merger, China-LAC Industrial Cooperation Fund’s planned equity stake purchase into the Barueri Waste-to-Energy project in Brazil will also be subject to a new review, the source and a second source familiar said.  

With a final target size of USD 30bn (USD 10bn at the first close), the China-LAC Industrial Cooperation Fund is jointly funded by SAFE (80%) and CDB (20%), while the CAFIC is 80% funded by SAFE and 20% by China Eximbank.

Equity investments in energy and infrastructure projects are among primary focuses of the two funds, both of which were announced by top Chinese leaders in 2015 and managed by former CDB and Eximbank bankers upon the launch.

Both the funds did not reply to requests seeking a comment.

 

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