Chinese PE Huagai Capital builds $124m RMB continuation fund for healthcare assets

Photo by Josh Appel on Unsplash

Huagai Capital, a China-focused private equity firm that invests in healthcare, TMT, and culture sectors, has restructured its healthcare investments into an 800-million-yuan ($124.4 million) continuation fund.

Shenzhen Capital Group, a Chinese investment conglomerate with about 412.2 billion yuan ($64.1 billion) in total assets under management (AUM), co-launched the fund as its biggest limited partner (LP). Hong Kong-based TR Capital, which specialises in secondary PE investments in the Asia-Pacific region, was another cornerstone LP.

The transaction saw Beijing-based Huagai restructure six healthcare investments from three of its existing funds into the new RMB-denominated continuation fund – a vehicle built to take on the portfolio investments of a fund that is nearing the end of its lifespan. By setting up a continuation fund, LPs are given the option to cash out or to stay invested by recommitting to the new vehicle.

Huagai, founded in 2012 and now manages over 15 billion yuan ($2.3 billion), has joined a growing list of PE players to set up continuation funds, also known as secondary funds, to hold on to their quality investments reeling from the impact of the COVID-19 pandemic. Earlier this month, China’s Legend Capital also announced the close of its healthcare continuation fund, LC Healthcare Continued Fund I, at $270 million.

Globally, the trend of secondary funds is expected to gain more popularity as GPs demand a longer runway amid virus-induced market dislocations. Although the number of secondary funds closed in 2020 was down to 29 compared with 44 in 2019, a record $96.6 billion in new secondary funds was amassed last year, according to PitchBook data.

As the only international investor in the deal, TR Capital said that it made the investment through its Fund IV using Qualified Foreign Limited Partner (QFLP), which allows qualified foreign institutions to make PE investments in China. The firm announced in February the final close of its Fund IV at an expanded size of $350 million, after seeing “significant oversubscription” and “an ever-increasing pipeline” of secondary opportunities in Asia, particularly in China.

In a statement, TR Capital said that the transaction is “highly innovative in its structuring,” as it has introduced a new concept in the secondary market, i.e., hybrid RMB and USD QFLP secondaries.

“We forecast strong demand for this new innovative structure in China, and see this as a better way to invest in fast-growing and innovative companies in the digital consumer, technology and healthcare sectors,” said TR Capital managing partner Frederic Azemard in the statement.

“The healthcare sector is a key focus area for TR Capital in China given its growth and innovation. We see an increasing number of leaders emerging amongst biopharmaceutical, medical devices and in particular oncology companies,” he said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.