Exclusive: China investment guru Fang targets comeback with $2 billion Hopu II fund

Thu May 2, 2013 4:10am EDT
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By Stephen Aldred

HONG KONG (Reuters) - Fang Fenglei, a former Goldman Sachs banker and co-founder of Hopu Investment Management, is raising up to $2 billion in a new fund, people familiar with the matter said, as one of China's best known bankers seeks to add to his riches.

The launch of another Hopu fund removes the mystery surrounding the next move of a politically connected and closely watched China financier who stepped out of the limelight three years ago.

The new fund also revives a potential conflict, as Fang's dual role as a non-executive chairman of Goldman Sachs Gao Hua Securities, a unit of Goldman Sachs' China investment bank, and also as co-founder of Hopu, could put the rainmaker in the awkward position of competing with Goldman for deals.

Hopu surprised investors and rivals in 2010 when it suddenly wound down operations after raising and investing just one fund, which generated big returns and took part in several high-profile and profitable deals.

Sixty-one-year-old Fang is a veteran China dealmaker who earned his stripes by working in China International Capital Corp and Bank of China International, and led the restructuring and listing of state-owned enterprises such as China Mobile Ltd. In 2004, he became chairman of Goldman Sachs Gao Hua and Beijing Gao Hua Securities.

Hopu Master Fund II, as the new fund is called, has received about $1 billion in commitments, Fang has told some investors without disclosing the source of funds, the people said. The second fund's investment strategy is unclear at this time, they added.

Hopu's debut fund raised $2.5 billion in 2008 and was generating an internal rate of return of about 46 percent at the end of last year. Over the next two years it deployed most of the capital - adopting an investment strategy more akin to a hedge fund than a regular private equity firm - and made money through a series of quickfire public and private deals.

Hopu rose to prominence by buying Chinese bank stakes that were being offloaded by retreating European and U.S. financial institutions in the wake of the global financial crisis.   Continued...