Legend Capital, one of China’s largest general partners, has successfully moved its portfolio companies from a 2008 fund into a $200-million continuation vehicle backed by US-based alternative investment management firm Hamilton Lane.
In a statement, the venture capital arm of Chinese investment firm Legend Holdings said the secondary continuation fund transaction provides LC Fund IV investors with the option of liquidity or opportunity to maximise portfolio companies’ value potential.
LC Fund IV closed in 2008 with commitments of $350 million. Its portfolio consists of 12 China-headquartered companies. The continuation fund has a five-year holding period.
”Secondary transactions are an important portfolio management tool for Legend Capital. They provide LPs with flexible liquidity options and create mutually beneficial solutions for portfolio companies, LPs and GPs,” said Hao Chen, managing director and president of Legend Capital.
Hamilton Lane, through accounts that it manages, acted as lead investor in the transaction, with several other prominent institutional investors participating in the syndicate.
Legend Capital said the investors also committed follow-on capital for strategic investments in the portfolio companies.
Legend Capital, which has total assets under management worth 400 billion yuan ($57 billion), targets early-stage and expansion-stage investments. The venture capital firm has raised about seven US dollar-denominated funds and four RMB funds.
Hamilton Lane, on the other hand, manages approximately $66 billion in discretionary assets under management as of December 2019. It employs about 400 professionals operating in offices throughout the North America, Europe, Asia-Pacific, Latin America, and the Middle East. It opened an Australia office in 2017.
The firm said the transaction demonstrates its presence within the Chinese private markets and its ability to execute on complex secondary deals.
Independent PE advisory firm Campbell Lutyens, which advised Legend Capital on the transaction, said the successful completion of a continuation fund for a portfolio of companies is one of the first transactions of its kind in China and an important milestone in the Chinese private equity market.
“We expect to see more transactions such as this one, which demonstrate the opportunities available for GPs in the secondary market,” said Campbell Lutyens partner Immanuel Rubin.