Investcorp Bold Yuan Move: Bahrain-based alternative asset manager Investcorp is embarking on an ambitious venture, aiming to raise between 2 billion to 4 billion yuan ($274 million-$548 million) for its inaugural private equity fund denominated in the Chinese currency. Hazem Ben-Gacem, co-chief executive officer of Investcorp, outlined the plan, indicating the firm’s intention to secure a license from Chinese regulatory bodies in the coming months.
The goal is to commence fundraising activities from domestic institutions next year, with the final size contingent on investor interest and market conditions. Ben-Gacem expressed his vision for Investcorp to be perceived not just as a Middle East investor but as a local Chinese investor over time.
This strategic move aligns with the broader trend of strengthening business ties between the Middle East and China, fueled by the Gulf states’ push in infrastructure, technology, and finance. The geopolitical landscape, including tensions between Sino-U.S., has not deterred investors from the Gulf states, with 13 acquisitions of public and private Chinese targets announced this year, a significant increase compared to 2022.
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Investcorp has already made substantial inroads into the Chinese market, completing its first buyout in May by acquiring a controlling stake in Shandong Jianuo Electronics, a key player in electric vehicle power management and battery charging infrastructure. Other notable transactions by Middle East investors in Chinese firms this year include Aramco’s purchase of a 10% stake in Rongsheng Petrochemical and Abu Dhabi-backed CYVN Holdings’ $738.5 million equity investment in electric car maker NIO Inc.
Ben-Gacem sees the Gulf region potentially becoming a crucial source of yuan-denominated capital, particularly as Middle East countries settle some trades in their local currencies. This move by Investcorp comes amid caution among U.S. investors due to Sino-U.S. tensions and the uneven Chinese economic recovery, making fundraising for China-focused funds challenging.
Despite headwinds, Investcorp’s strategic approach involves tapping into the increasing quantum of yuan within the Gulf Cooperation Council for reinvestment in China. The firm, managing over $42 billion in assets, has already invested more than $500 million in China, reflecting its commitment to the region. Investcorp’s foray into the Chinese market extends back to 2018, and in 2022, it launched a $500 million fund in collaboration with the Hong Kong-based private investment office of the Fung family, focusing on mid-cap companies in southern China and Hong Kong.
Our Reader’s Queries
How rich is Investcorp?
With $50 billion in assets under management as of April 2023, this company specializes in private equity, real estate, and credit management. Their expertise in these areas allows them to effectively manage and grow their clients’ investments.
Can you invest in the yuan?
Investors have a range of options when it comes to investing in yuan. These include buying yuan directly and holding it in cash, investing in funds that hold the Chinese currency, and purchasing yuan futures contracts. However, it’s important to note that each investment option comes with its own unique nuances.
Is Investcorp Sharia compliant?
Investcorp has provided its clients with 42 investment opportunities that are Shari’ah-compliant over the past decade. This equates to an average of more than four opportunities per year.
Who owns Investcorp?
ISA owns and controls the majority of Investcorp Group’s assets and operations, which means that most of the commercial risks are held outside of the Middle East.