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Adia pivots eastward to provide liquidity to Chinese PE: An Abu Dhabi Investment Authority (Adia) subsidiary acted as lead investor in a USD 770 mn continuation vehicle (CV) for Beijing-based alternative asset manager CDH Investments’ fifth flagship fund, according to a press release (pdf). The vehicle aims to acquire a portfolio of mid-large-cap assets, primarily focused on China. CDH Investments manages upwards of USD 20 bn in assets.
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Uh, Enterprise, what’s a continuation vehicle? CVs allow PE firms to sell portfolio companies to themselves by transferring them to another of its internal funds. Investors can either cashout or roll ownership over into the new vehicle; in theory, giving them more time to realize value. The structures have been gaining traction in private equity (PE) by providing liquidity when traditional exits such as IPOs or M&A are difficult. Roughly one in five PE exits used the structure last year, and as much as USD 107 bn worth of assets were funnelled through them.
Our take
Adia’s focus on Chinese assets highlights GCC sovereign wealth funds’ growing interest in Asia thanks to its high growth potential, expanding consumer markets, and young population, Sovereign Wealth Fund Leader at Deloitte Middle East Julie Kassab told us last year.
The Western decoupling from China is only helping matters: American and European investors’ reduced exposure to China — the World Economic Forum reported recordlows from the US last year — is opening avenues to invest in proven Chinese market leaders amid weaker competition.
Adia has several transactions in motion in China: The sovereign entity is reportedly set to anchor the USD 600 mn Hong Kong IPO of Chinese AI startup MiniMax, and previously committed up to USD 1.5 bn to Singapore-based GLP, which plans to expand its data center footprint and operations in China.
ADVISORS- Fairview Capital Group acted as financial advisor to CDH, while Debevoise & Plimpton served as counsel. Freshfields acted as counsel for Adia.
