CDH Investments

CDH Investments (CDH, 鼎晖投资基金管理公司) is a major Chinese alternative asset management firm based in Beijing, China. It specializes in private equity, venture capital and credit products.[2] CDH invests across a range of sectors and regions. As of March 2015, CDH manages over RMB 100 billion of investor capital across its various investment platforms.

CDH Investments
Native name
鼎晖投资基金管理公司
Private, limited liability
IndustryAlternative investment
Founded2002 (2002)
HeadquartersFortune Financial Center
5 Dongsanhuan Central Road
Chaoyang District, Beijing, China
ProductsPrivate equity, venture capital, public equity, mezzanine, real estate, wealth management
Total assets$17 billion[1]
Websitecdhfund.com

Founded in 2002, CDH is a diversified alternative asset manager covering private equity, venture capital, mezzanine, real estate, and wealth management.[3] Its investor base includes sovereign wealth funds, pension funds, insurers, endowments, family offices and fund of funds from China, North & South America, Europe, Middle East, Australia and Asia.

CDH invests across industries including information technology, media, modern services, innovative engineering technology, telecommunication technology and services, new media, industrial manufacturing, education, finance, fast growing high-tech and services, energy, clean technology, healthcare, medical, retail, consumer product and services, and agricultural industry.[4]

Since inception, CDH has invested in or acquired hundreds of companies including Hang Seng Electronics, Mengniu Dairy,[5] Li-Ning, Focus Media, Yurun Food, Yongle, China Merchants Bank, Belle International, LDK, AirMedia, CNInsure, Joyoung, Shanshui Cement, Modern Dairy, Hanting Hotel, Kanghui Medical, TSL Jewelry, M&G Stationery,[6] Xueda Education, Qihoo 360, Midea, WH Group,[7] Luye Pharma, Nanfu Battery,[8] and Baroque Japan Limited.[9]

CDH is headquartered at Fortune Financial Center, 5 Dongsanhuan Central Road, Beijing, China, with additional offices in Shanghai, Shenzhen, Hong Kong, Singapore, and Jakarta.

History

In 1992, Wu Shangzhi, then Senior Investment Officer at the World Bank Group's Direct Investment Division, decided to establish an investment firm in China. He approached GIC with a fund raising proposal. Instead of considering an equity commitment, GIC suggested Wu to join China International Capital Corporation, an investment bank that GIC was involved in the preparatory work related to the firm's establishment at that point. Wu led the direct investment business at China International Capital Corporation until it was split off by the firm in 2001, when China Securities Regulatory Commission prohibited investment bank from doing private equity investment.[10]

In 2002, CDH was established with six founding partners including Wu Shangzhi and Jiao Zhen, who had worked together at China International Capital Corporation's Direct Investment Division since 1995. Other shareholders include GIC, China National Investment & Guaranty Co Ltd, and Capital Z Partners.[11] CDH have kept all the six founding partners within the firm to this day,[6] despite famously losing its head of venture capital, Wang Gongquan, who ran away with his mistress.[12][13]

In 2003, CDH raised only $102 million for its first standalone fund, but quickly found its way into a series of successful China deals, including stakes in sportswear company Li-Ning, display advertising firm Focus Media and Mengniu Dairy. That first fund returned around 3.5 times its investors' money, according to data seen by Reuters, making it one of the top performing funds in China, and enabling it to raise capital for a series of bigger funds.[12]

In 2006, CDH and Goldman Sachs invested $256 million in a controlling stake in a struggling meat producer, then known as Shuanghui Group, along with Temasek and New Horizon Capital.[14] That buyout deal, one of the first of its kind in China, sparked controversy as opponents claimed the country was selling assets too cheaply to foreign investors. Goldman sold half its stake back to CDH in 2009 for five times what it originally paid.[15]

CDH's performance attracted large institutional investors into its funds, including California Public Employees' Retirement System and Canada Pension Plan Investment Board. 75 percent of CDH's private equity funds now come from international investors.[12] With a target cap at $2 billion, CDH's fifth USD PE fund was closed at a hard cap of $2.5 billion due to over-subscription.[16]

Businesses and affiliates

CDH's family of funds includes private equity, venture capital, real estate, mezzanine and credit products.

Private equity

CDH manages five funds denominated in United States Dollars funds and two funds denominated in Chinese Yuan (RMB), with cumulative assets under management in excess of US$15 billion.

Fund Vintage Year Committed Capital (mn)
CDH China Fund, L.P. 2002 USD 102
CDH China Growth Capital Fund II, L.P. 2005 USD 310[17]
CDH China Fund III, L.P. 2007 USD 1,600
CDH first domestic RMB-denominated private equity fund 2008 RMB 4,000
CDH Fund IV, L.P. 2010 USD 1,400[18]
CDH second domestic RMB-denominated private equity fund 2012 RMB 8,000
CDH Fund V, L.P. 2014 USD 2,620[19]

Venture capital

CDH established its venture capital business in 2006 and currently manages more than USD 1 billion of assets through several USD and RMB funds. The investment focus covers telecom, media, technology, and health care sectors.

Fund Vintage Year Committed Capital (mn)
CDH Venture Partners, L.P. 2007 USD 210[20]
CDH Venture Partners II, L.P. 2008 USD 505
CDH first domestic RMB-denominated venture fund 2010 RMB 1,300
CDH Venture Partners III, L.P. 2012 USD 90

Real estate

CDH's real estate business was set up in 2009 and currently manages more than USD 700 million of assets through several USD and RMB funds, focusing on development projects with a sector mix of approximately 50/50 residential and commercial properties. CDH has invested in 13 real estate projects in 12 cities across China, as of June 30, 2014.

Fund Vintage Year Committed Capital (mn)
CDH first RMB-denominated real estate fund 2009 RMB 420
CDH second RMB-denominated real estate fund 2010 RMB 1,000
CDH third RMB-denominated real estate fund 2012 RMB 1,200

Credit

In 2011, CDH launched its mezzanine and credit business and currently manages more than USD 640 million of assets through several USD and RMB funds, with a focus on high-yield debt solutions to finance real estate, energy resources and equity mergers and acquisitions.

Public equity

Cephei Capital was founded in 2006 with the support from CDH. Cephei focuses on investing in Chinese companies in the secondary market. Cephei now manages separate accounts for a number of Qualified Foreign Investment Institutions (QFII) in the China A-share market. At the same time, Cephei also manages a variety of long-biased public equity funds and collectively manages more than USD 1.5 billion in assets.

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References
  1. "About CDH-CDH". cdhfund.com.
  2. "CDH Investments: Private Company Information - Businessweek". Businessweek.com. Retrieved 2016-02-08.
  3. "Q&A: CDH Investments' Shangzhi Wu | AVCJ". Asian Venture Capital Journal. Retrieved 2016-02-06.
  4. "About CDH-CDH". www.cdhfund.com. Retrieved 2016-02-06.
  5. "Innovations In Emerging Markets: How A Private Equity Fund in China Helps Development". ifcblog.ifc.org. Retrieved 2016-02-07.
  6. "鼎晖吴尚志：12年投资150多家企业逾30家上市，6名合伙人无一离职". Forbes China. 2014-12-30.
  7. Gopalan, Cynthia Koons And Nisha. "China's CDH Raises Its Profile". Wall Street Journal. ISSN 0099-9660. Retrieved 2016-02-06.
  8. 刘铮. "CDH completes buyout of Nanfu Battery from P&G - Business - Chinadaily.com.cn". www.chinadaily.com.cn. Retrieved 2016-02-06.
  9. "CDH has taken a 23 percent stake in Baroque". Business of Fashion.
  10. "鼎晖吴尚志：12年投资150多家企业逾30家上市 6名合伙人无一离职". Forbes China. 2014-12-30.
  11. "Our History-CDH". www.cdhfund.com. Retrieved 2016-02-06.
  12. "RPT-Pulled pork IPO shows China private equity not yet ready for world stage". Reuters. 2014-05-18. Retrieved 2016-02-08.
  13. "CDH Investments Founder Elopes with Lover". Caixin. 2011-05-18.
  14. Barboza, David (2013-06-02). "Behind the Chinese Bid for Smithfield Foods". The New York Times. ISSN 0362-4331. Retrieved 2016-02-08.
  15. "Goldman to sell stake in landmark China buyout deal". Reuters. 2009-11-04. Retrieved 2016-02-08.
  16. "CDH Investments' Fifth Fund Oversubscribed, to Close at $2.5B". pevc.dowjones.com. 2014-01-10.
  17. "CDH China II". ifcext.ifc.org. Retrieved 2016-02-07.
  18. "MBK Partners, CDH Investments hit the fundraising trail | AltAssets Private Equity News". www.altassets.net. Retrieved 2016-02-06.
  19. "CDH Fund V". ifcext.ifc.org. Retrieved 2016-02-07.
  20. "CDH Venture Fund". ifcext.ifc.org. Retrieved 2016-02-07.

Further reading

Walter, Carl E.; Howie, Fraser J. T. (2011). Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise. Singapore: Wiley. ISBN 978-0470825860.

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