The China-ASEAN Investment Cooperation Fund (hereinafter referred to as the ASEAN Fund) led by the Export-Import Bank of China (hereinafter referred to as the Export-Import Bank) is anchored soon. The first phase has raised nearly 1 billion US dollars, and China Investment Corporation (hereinafter referred to as CIC) has invested and participated in 20% of the shares, which has attracted a lot of attention in the industry. At the same time, the question is whether ASEAN funds can remove the innate Official colors? According to a person from the Export-Import Bank, this is the first PE (Private Equity Fund) established by the bank and the first government-led, market-oriented private equity fund between China and ASEAN. As the first domestic cooperative fund established with ASEAN countries, the fund was established in ten phases with a target size of 10 billion US dollars, setting a new record for the China-Africa Development Fund (hereinafter referred to as the China-Africa Fund). The China-Africa Fund was originally the largest PE in the country so far. It was initiated and established by the China Development Bank with a target scale of up to US $ 5 billion and a duration of 50 years. "Whether it is the US $ 5 billion of the China-Africa Fund or the US $ 10 billion of the ASEAN Fund, it is still the target size. Now the second fundraising of the China-Africa Fund has just started with US $ 3 billion." A senior person in the PE circle pointed out The success or failure of investment will become the touchstone of market inspection.
In terms of structure, the ASEAN fund is slightly better than the China-Africa fund. Because the first funder of the China-Africa Fund has only one bank, the managers and investors completely overlap, so it is more regarded by the industry as the nature of investment companies. Moreover, although the China-Africa Fund is a US dollar fund, it is registered in Beijing and Chinese laws apply. The ASEAN Fund adopts the internationally-limited limited partnership structure of PE. The fund management company Comfort Investment Consulting Co., Ltd. (hereinafter referred to as Comfort Investment) is incorporated in Hong Kong and operates offshore, and is governed by Hong Kong laws. "The fund fully refers to the operation mode of private equity funds in the world, including equity structure, interest distribution methods, etc., and the projects are selected by the management team recruited from around the world." However, according to people familiar with the matter, the fund's funders and shareholders of its investment advisory firm, Capital Investment Advisory Co., Ltd., still have a high degree of overlap. The current management team's main senior executives are still from the Export-Import Bank. "Import Bank's own market-oriented operation is not high. Can ASEAN funds embark on a true market-oriented and professional operation?" People in the industry can't help but doubt.
Go official
Li Ruogu, chairman and president of the Export-Import Bank, said that the ASEAN Fund is "a major innovation in the financing model of the Export-Import Bank."
The shareholders of ASEAN Fund include Export-Import Bank, China Investment Corporation, Bank of China Group Investment Co., Ltd., and China Communications Construction Co., Ltd., among which Export-Import Bank is the controlling party, accounting for 55% of the shares, and CIC accounts for 21% of the shares.
The ASEAN Fund started in October 2009, and at the end of April, it established a low-key fund management company, Comfort Investment. Li Ruogu also serves as chairman and the president is Zhu Xinqiang, vice president of the Export-Import Bank. Before joining the Export-Import Bank in 2007, Zhu Xinqiang worked for Bank of China, where he served as General Manager of the Capital Department, General Manager of the Global Financial Market Department, and Assistant to the President.
The structure of the ASEAN Fund is quite similar to the Bohai Industrial Fund (hereinafter referred to as the Bohai Fund), that is, the investor is also a shareholder of the fund management company, and the first phase of the fund was established before the management company. The internationally accepted approach is that industrial fund investors choose fund managers based on their capabilities and performance. Investors generally do not participate in fund management. Based on project progress, investors will then put funds in place at any time. Bohai Fund is the first industrial investment fund in China. At the beginning of its establishment, the relevant legal conditions were not complete, so the company system was adopted, but the management team worked hard to achieve market-based recruitment, rather than direct control of major shareholders. The ASEAN Fund ’s implementation of the limited partnership system is more reasonable in structure, but the current senior management is basically from large shareholders, indicating that the degree of marketization needs to be improved.
"The key to marketization depends on the composition of the decision-making committee and whether it is independently determined by professional investors recognized by the industry. The decision committee of the China-Africa Fund is all from CDB, and it is difficult for shareholders to interfere." China-Africa fund admits.
Relevant persons of the Export-Import Bank emphasized that although the bank is the controlling party, it will not directly lead and participate in the specific management and operation of the enterprise. In the future, it will rely on a professional team to manage the operation fund, and the profit distribution will also follow the incentives of the international limited partnership Way, "Shareholders mainly play the role of corporate governance and do not rely on the people sent by shareholders in the management company."
Taking Bohai Fund's lessons as an example, its market-oriented operation is full of twists and turns. Industry experts said that the ASEAN fund is more administrative in nature, and how to rationalize the relationship with foreign professional managers in the future will not become a "playing by yourself" game. It is indeed a challenge.
Investment and cost
In less than a year, the Export-Import Bank completed the first phase of the fund ’s nearly US $ 1 billion in raising, of which the Export-Import Bank contributed US $ 300 million. Comfort Investment has signed with the aforementioned three major shareholders and the World Bank ’s International Finance Corporation Investment memorandum of understanding.
According to relevant sources, after the completion of the first fundraising, the ASEAN Fund will be further opened to professional investment institutions at home and abroad, especially the professional investment institutions of ASEAN countries. The investment threshold of the first-phase investment partners is required to be above US $ 30 million.
According to the aforementioned import and export bank, there is no time limit for the ASEAN fund. The size of the first phase is about 1 billion US dollars. When the fund completes 70% of the investment in the first phase, the second phase of the fund will be initiated. Until the total scale of 10 billion US dollars.
The initial scale of the China-Africa Fund is also US $ 1 billion. The second phase will increase to US $ 3 billion, and will eventually reach US $ 5 billion. The first phase of the fund will be independently funded by CDB. The second phase will have other domestic institutions participating in the investment. In the process of reaching US $ 5 billion, international investors may be introduced as investors. However, since the second phase of fundraising started in 2009, no successful information has been transmitted.
Therefore, some analysts pointed out that the ASEAN fund's investment in the China Investment Corporation also meant to ensure fundraising. People close to CIC said they are optimistic about ASEAN's business opportunities and benefits. At present, CIC has invested in at least two PEs with Chinese background. In addition to ASEAN funds, there is also CITIC Capital Fund Management Company established in Hong Kong. CIC holds 40% of the shares with HK $ 2 billion.
The single investment target of the ASEAN Fund is generally 50 million US dollars. The target investment area is the ten ASEAN countries, covering Laos, Cambodia, Myanmar, Thailand, Vietnam, Malaysia, Singapore, Brunei, Philippines, Indonesia and other countries. The withdrawal of the fund is controlled 5 to 7 years after the operation of the project. Compared with the railway and other infrastructure projects, the exit time is relatively short. Relevant persons from the import and export bank said that the continuation will be determined according to the situation of the country where the project is located.
The first phase of the US $ 300 million contribution from the Export-Import Bank will occupy its capital. It is necessary to consider whether the return on investment can exceed the loan income, which also puts practical requirements on fund managers. According to the survey by the Export-Import Bank on the Southeast Asian market, the ASEAN Fund expects an internal rate of return of 13% to 16%. At this level, the cost of capital can be covered.
"ASEAN belongs to an emerging market, and its economic maturity is higher than that of Africa. For example, Vietnam lacks electricity, and there is a steady increase in demand for infrastructure construction." The Export-Import Bank is quite optimistic.
New way of capital export
"The ASEAN Fund is a new development stage that complies with China's capital export. Previously it was mainly a commodity trade transaction. The current fund investment is an attempt, but it requires long-term experience accumulation and economic cycles to test specific investment strategies." Said.
According to estimates by the Export-Import Bank, from 2008 to 2012, the demand for infrastructure investment in ASEAN countries will reach 202.3 billion to 356.5 billion US dollars. According to the equity ratio of 20% to 35%, ASEAN countries need equity investment of approximately US $ 40.5 billion to US $ 124.8 billion in infrastructure construction.
On April 18, 2009, Wen Jiabao officially announced at the Boao Forum for Asia Annual Conference 2009 that China has decided to establish an ASEAN fund with a total scale of US $ 10 billion to support regional infrastructure construction. On August 15, the China-ASEAN Free Trade Area "Investment Agreement" was signed, and both parties began to open up the investment market.
According to a person from the Export-Import Bank, after the first phase of the investment is completed, the follow-up fund will determine the appropriate investment direction and fields from the actual economic cooperation between China and ASEAN countries, such as manufacturing, modern services including financial services, etc. .
Li Ruogu said that in the future the bank will also strive to undertake or participate in investment funds that comply with national policies and are approved by the competent government department.
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