China-focused Prax Capital is among the first foreign firms to set up a local private equity fund and management firm in Shanghai's Pudong New Area financial district.
Prax will register two separate entities as general partners in order to raise a total of up to RMB1.5 billion ($219 million; €153 million) for two funds, Clark Lu, executive director of Prax Capital, said in an interview.
The firm aims to raise between RMB500 million and RMB1 billion for a real estate fund and between RMB300 million and RMB500 million for a growth capital fund, Lu added.
Prax is taking advantage of a pilot policy which was introduced in June, allowing foreign private equity and venture capital firms operating in Shanghai Pudong New Area to establish wholly-owned Chinese subsidiaries. Other foreign firms that have recently been given licences to operate subsidiaries in Shanghai and raise funds denominated in the local currency include The Blackstone Group, CLSA Asia-Pacific and First Eastern Investment Group. The Carlyle Group is also in talks to set up an RMB fund in China, a source confirmed with PEI Asia last week.
Prax is also currently raising capital for the USD-denominated Prax Capital China Growth Fund III, which is targeting commitments of $300 million and has a $400 million hard cap. The fund had a first retail close on $25.5 million in July 2009 and expects a second retail closing in October on more than $30 million. The institutional tranche of fundraising will start on 1 September, with a first institutional close targeted for 15 December, Lu said.
The firm, which has offices in Shanghai, Hong Kong and Miami, manages three other USD-denominated off-shore funds. Prax Capital China Growth Fund I, a $19 million fund of vintage 2005, was fully exited earlier this year with a gross IRR of 345 percent and a 6.82 times multiple. Prax’s second growth capital fund is a $150 million vehicle, from which it has invested about $87 million thus far.
It also manages the 2007 vintage Prax Capital China Real Estate Fund I, a $140 million vehicle which primarily invests in second-tier Chinese cities with a strong residential component. That fund has committed to invest in five deals and is expected to be fully invested by the end of 2009, Lu added.