China’s CTC Capital has held the first close of a new RMB-denominated fund at 1.2 billion yuan ($167.2 million) to double down on the country’s integrated circuit industry.
The fund has garnered capital commitment from over half of its existing limited partners (LPs), the company announced on Tuesday without divulging the names. Meanwhile, state investors affiliated with the Yangzhou municipal government and the Changsha municipal government have also pumped capital into the fund, it said.
This is the third RMB fund of the firm that exclusively targets China’s semiconductor sector. Its oversubscribed predecessor fund hit a final close in April 2021 at 3.5 billion yuan ($539 million), with the participation of government-led funds, state-owned industry majors, and fund-of-funds.
As of April 2023, the predecessor fund had clocked an internal rate of return (IRR) of 42% within four years since its launch in April 2019.
The second RMB fund has since backed a total of 35 firms. For some of the startups that the second fund has made full exits, the IRR hit over 80%, according to the release.
Founded by veteran investor Andy Kung in June 2006, CTC Capital serves as the lead investor in over 80% of its portfolio firms. Some of its portfolio firms include Chinese GPU design startup MetaX, self-driving chip firm EVAS Intelligence, and IC packaging material firm AaltoSemi.
Prior to CTC Capital, Kung served in key roles in several semiconductor industry-focused funds including Pacific Venture Partners, Oriza Seed, and Tongli Venture Capital.
The firm’s first close arrives at a time when China-focused private equity and venture capital (PE/VC) firms have found it increasingly challenging to raise amid the market downturn.
For the first three quarters of 2023, China’s PE/VC funds raised a combined 1.4 trillion yuan ($191.1 billion), down 20.2% from the same period in 2022, according to market researcher Zero2IPO Group.
LPs have become more cautious, taking a wait-and-see approach, CTC Capital noted in the release, citing that the firm’s investment returns and strong relationship with its LPs are helping in fundraising despite the current downturn.
Going forward, the firm seeks to shore up investments across the intersection between semiconductor and emerging technologies such as AI, metaverse, augmented reality, and virtual reality, among others.