Investcorp and Fung Capital set up new $500m fund to invest in mid-cap companies in China

Fund will engage in privately-negotiated equity or equity-linked investments in growing and profitable companies

Bahrain-based Investcorp and Fung Capital are setting up a new $500m fund to invest in mid-cap companies in China’s Greater Bay Area. Photo: Investcorp

Bahrain's alternative asset management firm Investcorp and Hong Kong-based private investment office Fung Capital will set up a $500 million fund to invest in mid-cap companies across China’s Greater Bay Area.

The fund, which was announced during the Future Investment Initiative (FII) in Riyadh, will focus on buyouts of companies in the Guangdong province, Hong Kong and Macau, Investcorp said on Wednesday.

“The GBA’s role as one of the main economic engines of China has never been more important as the country looks to rebalance its economy towards a consumption and innovation driven model, and the GBA offers enormous investment potential,” Mohammed Alardhi, Investcorp’s executive chairman, said.

Once established, the fund is currently expected to operate out of Hong Kong and will focus on privately-negotiated equity or equity-linked investments in growing and profitable companies based in or close to the GBA, Investcorp said.

While the fund will not be sector-specific, it will focus on control buyouts of mid-cap enterprises with “proven profitability and strong growth potential”, Investcorp said.

Investcorp, which is planning a rapid expansion of its GCC and Asian investment portfolio, expects its assets under management to more than double to $100 billion in seven years, Mr Alardhi told Bloomberg last year.

The new fund marks the fourth venture between Investcorp and Fung Capital, the private equity investment arm of 115-year-old Fung Investments, the Hong Kong-based private investment office of the families of Victor Fung and William Fung.

The GBA is a globally competitive industrial and technology cluster within China. The area includes major capital market Hong Kong, China's main tech hub Shenzhen and research and development city clusters linked by high-speed train to airports and container ports.

“Our differentiator is that our fund is buy-out focused and we believe there is huge scope for strong returns,” said Investcorp’s co-chief executive Hazem Ben-Gacem.

“This is underpinned by the continuous influx of a highly educated and skilled workforce and in combination has created big success stories such as Tencent, ByteDance, BYD and Mindray.”

The fund will “invest in businesses meeting the unique needs and aspirations of Millennials and Gen Zers across China and the world,” Kevin Lam, managing partner of Investcorp Fung GBA Fund, said.

“Hong Kong is strategically located for investors to access the fast growing consumer markets in the Greater Bay Area and as a bridge between China and the World.”

With a population larger than Germany and an economy already surpassing that of Canada, China’s GBA region attracts tens of thousands of highly educated and skilled people each year, Investcorp said.

Underscoring the scope for greater growth in the region, Investcorp said the GBA's per capita GDP is currently around $22,501, which is still smaller than that of other leading bay areas such as Tokyo ($45,084), New York ($78,586) or San Francisco ($128,573).