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Warburg Pincus plans to raise up to $4 billion for new China fund - sources

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By Julie Zhu

HONG KONG (Reuters) - Warburg Pincus LLC [WP.UL] is looking to raise its second China-focused private equity fund of up to $4 billion (3.1 billion pounds), giving the U.S. investment firm more firepower to cut deals in the world’s second-largest economy, sources told Reuters.

The firm plans to formally launch the fundraising early next year, said the sources who declined to be named as the information was confidential. The move comes after it invested in Ant Financial's $14 billion financing round in June.

Warburg Pincus's new China fund will also invest alongside the firm's latest global PE fund which is set to close in the coming months, said the sources. The two funds will contribute equally to Warburg Pincus's future investments in China, they added.

Warburg Pincus declined to comment.

The latest fundraising will add to a massive industry-wide pool of money for Asian acquisitions and investments, notably in China, with investors attracted by rapid economic growth and a bigger pool of fast-growing technology companies compared to other major markets.

As of mid November, Asia-focused PE managers raised a combined $49 billion in dollar-denominated funds for the region, up from $37.8 billion over the same period last year, according to data provider Preqin.

China's Hillhouse Capital in September raised Asia's biggest PE fund at $10.6 billion. In June, Blackstone Group <BX.N> said it had raised about $9.4 billion for two new funds - the largest-ever fund dedicated to real estate investments in Asia as well as its first PE fund for the region.

Founded in 1966, Warburg Pincus was an early player in the Chinese market, with its first investment being made in 1994. Its second China fund will continue to invest in sectors including healthcare, financial services, technology, consumer and real estate, sources said.

The firm's China investments include stakes in ESR, a pan-Asia logistics real-estate firm which plans a $1.5 billion Hong Kong IPO next year, according to Refinitiv publication IFR, as well as Chinese electric-vehicle maker NIO <NIO.N> and Chinese courier ZTO Express <ZTO.N>, both of which are already listed in New York.

Its first China fund, which raised $2 billion in late 2016, saw a 27.8 percent net internal rate of return as of the end of June, according to disclosures by one of the fund's limited partners - the Washington State Investment Board.

(Reporting by Julie Zhu; Additional reporting by Kane Wu; Editing by Stephen Coates)

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