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GIC and NewQuest back yuan fund restructuring – exclusive

The deal pushes Loyal Valley Capital, which owns stakes in large Chinese tech companies, one step closer to raising its own dollar-denominated fund.

Government of Singapore Investment Corporation and NewQuest Capital Partners have backed a deal that will open up a Chinese general partner to foreign investors for the first time.

The transaction involved restructuring a portfolio of assets held in a yuan-denominated vehicle managed by Loyal Valley Capital into a dollar-denominated fund backed by the two secondaries buyers and existing Chinese investors, according to a source familiar with the deal.

Eaton Partners advised on the deal.

Loyal Valley Capital Advantage Fund contains stakes from a number of early stage healthcare companies and Chinese ‘unicorns’ – technology companies valued at more than $1 billion, Secondaries Investor understands. The most highly-prized asset is Bytedance, owner of news aggregation platform Jinri Toutiao, which is rumoured to be considering an IPO.

It is not clear how many original investors rolled over into the vehicle and how many exited. Loyal Valley will eventually launch an independent US dollar fundraise, the source said.

It is understood the deal closed in June.

According to a 30 May filing with the Securities and Exchange Commission, Loyal Valley Capital Advantage Fund had raised $370 million from 32 individual investors of a $390 million target.

Loyal Valley was founded by Andy Lin, founder and former chief executive of China Universal Asset Management, a mutual funds business that had the equivalent of $73 billion in assets under management by the time of he left in 2015.

Previous GP-led deals GIC has backed include the $450 million restructuring of two technology-focused funds managed by Vector Capital, in which it teamed up with Goldman Sachs, at the beginning of this year.

NewQuest is investing the 2016-vintage Asia Fund III, which raised $540.5 million, according to PEI data.

Deal volume involving Asian funds doubled to account for 14 percent of global value in the first half of this year, according to a report by Greenhill.

ICG and Goldman Sachs Asset Management are among secondaries firms active in the region: in July they backed the spin-out of a Chinese conglomerate’s captive private equity team, Secondaries Investor revealed. Aretex was the captive private equity team of Chinese investment firm ZZ Capital International.

China-focused funds accounted for 23 percent of secondaries transfers to take place in Asia during 2017, the highest in the region, according to research by Greenhill.

NewQuest declined to comment. Loyal Valley and GIC did not return requests for comment.

Article modified to reflect role of Eaton Partners