Exclusive: Princeling-backed firm eyes $500 million China buyout fund - sources

Mon Apr 8, 2013 6:43pm EDT
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By Stephen Aldred

HONG KONG (Reuters) - Nepoch Capital, a new private equity firm founded by the son of a former member of China's politburo, has launched the first 'princeling' fundraising since the new government took power last month vowing to clamp down on cronyism and nepotism.

China's so-called princelings, the sons and daughters of the country's elite, have a long association with private equity funds, and their investments - and sometimes bumper profits from a swift exit from lucrative initial public offerings - have drawn accusations of favoritism and corruption.

The view that princelings have the inside track on investments through their families' political connections is often what attracts investors, industry executives say.

He Jintao, the son of He Guoqiang, who used to be in charge of Communist Party discipline, has quickly raised $200 million from investors despite a tough fundraising climate, and is expected to reach a target of as much as $500 million by the mid-year, two people with knowledge of the plans told Reuters.

The success of He's fundraising may put Beijing in an awkward position, so soon after Xi Jinping took over as China's new president pledging to tackle widespread corruption within government. The behavior and wealth of the nation's princelings came to symbolize that corruption.

Four of the best-known funds with a history of high-level princeling involvement have raised a combined $10.4 billion for investments, according to Thomson Reuters and Preqin data.

Their ranks include Liu Lefei, CEO of CITIC Private Equity Funds Management and the son of politburo standing committee member Liu Yunshan; Winston Wen, co-founder of New Horizon Capital and the son of former premier Wen Jiabao; and Jiang Mianheng, a board member at New Margin Venture Capital in the 1990s and son of former China President Jiang Zemin.

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