Chinese assisted reproductive services provider Jinxin Fertility has become the latest limited partner (LP) in Warburg Pincus’s first Chinese yuan-denominated fund. 

Jinxin Fertility, which runs hospitals and healthcare centres in China, the US, and Southeast Asia, pledged to invest at least 200 million yuan ($28 million) in Warburg’s debut RMB fund, the firm announced in a WeChat post on Monday.

The new commitment has taken the RMB fund close to 90% of its targeted fundraising size of about 3 billion yuan ($419.5 million), Jinxin Fertility said in the post. This translates into a total committed capital of approximately 2.7 billion yuan ($377.5 million) to date.

Warburg launched its first RMB fund in early September after signing an agreement with the Chinese city of Yixing to secure a commitment from the local government. It did not specify how much Yixing invested in the fund.

A month earlier, Chinese medical tech platform WuXi AppTec agreed to invest no more than 600 million yuan ($83.9 million) in the fund. Its capital commitment will not exceed 19.9% of the final fund size, WuXi AppTec disclosed in a stock exchange filing on October 21.  

With an estimated size of 3 billion yuan, the RMB fund will invest in healthcare opportunities in China, focusing on areas like life sciences, pharmaceuticals, medical services, medical devices, healthcare IT, as well as healthcare distribution and retail businesses. It plans to invest in a total of 10-15 companies.

Warburg has invested north of 16.8 billion yuan ($2.3 billion) in the country’s healthcare industry to date. Its healthcare portfolio includes companies like hospitals and clinics operator United Family Healthcare, AI-powered drug discovery firm Insilico Medicine, oncology healthcare group Hygeia Healthcare, and eyecare product maker Zhenshiming.

RMB opportunities 

The US private equity (PE) firm’s decision to set up an RMB fund came amid a year of declined dealmaking in China by US investors due to macroeconomic challenges and geopolitical tensions. 

Through April 2023, US-based investors were slated to make less than 150 investments in China-based tech startups, putting 2023 on the road for the lowest deals in recent years, according to Crunchbase. 

In comparison, US-based investors completed 283 deals in 2022, which was already a drop from 426 in 2021 when the venture capital market hit a feverish pitch.

Investors are shifting sights to RMB opportunities in the world’s second-largest economy. China’s post-pandemic recovery, continued opening-up of its capital markets, and increased government support in developing homegrown tech have become some of the pivotal factors attracting foreign fund managers to look for RMB-backed growth. 

Earlier this month, Bahrain-based alternative asset manager Investcorp told Reuters its plan to raise 2-4 billion yuan ($281.6 million-$563.3 million) for its first RMB private equity fund to explore buyout deals in China.

Abu Dhabi sovereign investor Mubadala Investment Company, which holds a 20% stake in Investcorp, formally opened its Beijing office this September. Mubadala, the second-biggest state fund in Abu Dhabi, manages about $276 billion in investments with Chinese firms such as fast-fashion retailer Shein, electric vehicle maker Xpeng, and online recruitment platform Boss Zhiping.

US-based Hamilton Lane, which had $857 billion in assets under management and supervision as of March, officially set up its Shanghai office in February as its sixth Asian office. The Shanghai office will allow the firm to source RMB-denominated, LP- and GP-led secondary transactions under Shanghai’s Qualified Foreign Limited Partner scheme, which enables foreign investors to convert USD to RMB for investments in China’s private market.

Another global fund manager looking to tap China’s PE secondary market is Coller Capital. The London-based secondary manager announced in April its aim to raise 1.5 billion yuan ($211.2 million) for its first RMB PE secondary fund in China. The firm said that the LPs in its RMB fund include local Chinese governments.

In December 2022, Singapore-based buyout firm Affirma Capital, run by former Standard Chartered bankers, reached the first close of its maiden RMB fund. In total, the firm targeted a fund size of 2 billion yuan ($281.6 million).

The growing sophistication of China’s LP network and a more friendly regulatory framework also increased the country’s appeal as a new fundraising destination for foreign asset managers.

Blackstone is one of the latest to receive regulatory approval to raise RMB in the Chinese market for investments overseas. In August, Blackstone’s newly established China unit got the green light under the Qualified Domestic Limited Partnership scheme.

The programme has earlier enabled global asset managers including KKR & Co, BlackRock, and Oaktree Capital Management to cash in on Chinese investor demand for foreign assets.