Shanghai-based private equity (PE) firm Detong Capital announced on Wednesday that it has raised over 1.5 billion yuan ($205.2 million) for its latest RMB-denominated fund, as the firm targets a final close of up to 2 billion yuan ($273.6 million).
The new RMB fund, named “Changzhou Detong Hexin II Venture Capital Partnership (Detong Hexin II),” will continue to focus on emerging industries that are deemed strategically important to China’s national development, said Detong Capital in a post on its official WeChat account.
These include three key industries covering advanced manufacturing, healthcare, and the so-called “information technology application innovation,” a term coined by the government to describe the nurture of China’s home-grown alternatives to foreign IT, particularly in sensitive sectors such as banking and government administration.
Geographically, Detong Hexin II plans to leverage its headquarters in Shanghai to primarily source deals in the Yangtze River Delta in eastern China, a triangle-shaped megalopolis comprising Shanghai and a few neighbouring provinces.
CalPERS, Pantheon as foreign LPs
Limited partners (LPs) of Detong Hexin II include the 30-billion-yuan ($4.1 billion) fund-of-funds (FOF) platform Shanghai Sci-Tech Innovation Fund; a government guidance fund in Changzhou City, Jiangsu Province; and Jiangxi State-Owned Capital Operation Holding Group, among others, said Detong Capital.
The firm claims that about half of its existing LPs committed to the new fund, including foreign LPs which invested via the Qualified Foreign Limited Partnership (QFLP) scheme.
Detong Capital was one of the first batches of three investment firms, alongside Fosun-Carlyle (Shanghai) Equity Investment and Management and Blackstone (Shanghai) Private Fund Management, to pilot the QFLP programme when Shanghai, as the first in China, introduced the new rules in 2011 to allow foreign investors to buy shares in unlisted companies and launch yuan-denominated private market products in China.
In the post, Detong Capital disclosed that renowned foreign investors including Walmart’s Walton family; the US’s largest public pension fund CalPERS; Pantheon; and the Liechtenstein royal family, one of Europe’s richest, are among its existing LPs.
Managing an equivalent of nearly 20 billion yuan ($2.7 billion), Detong Capital was co-founded by seasoned private market investors Roman Shaw and Joe Tian, who have known each other for over two decades and have held executive positions at DragonTech Ventures, one of the earliest China-focused venture capital (VC) companies.
Since its inception, Detong Capital has invested in more than 200 companies, of which over 30 have gone public.
As the second to its Detong Hexin fund series, the new RMB fund came less than four years after Detong Capital closed the debut fund at 2 billion yuan in December 2019.
To date, the predecessor fund has made 55 investments, with exits from companies like internet data centre (IDC) solutions provider Golden Cloud Technology.
Fund I also invested in the now Nasdaq-listed Hesai Group, a Chinese maker of lidar light sensors for applications in autonomous vehicles and robotics. Its portfolio companies including cancer drug developer Adlai Nortye, chip testing services provider Shanghai V-Test Semiconductor Tech, and biopharmaceutical firm MicuRx also went public in the past year or so.