Right before the pandemic struck, a slated £1 billion ($1.2 billion) buyout fund backed by HSBC Holdings Plc and sovereign wealth fund China Investment Corporation was hailed as an example of growing business ties between Beijing and London.
(Bloomberg) — Right before the pandemic struck, a slated £1 billion ($1.2 billion) buyout fund backed by HSBC Holdings Plc and sovereign wealth fund China Investment Corporation was hailed as an example of growing business ties between Beijing and London.
Three years later, the venture is a mirror to China’s fraying relationship with Europe and the US, as well as the years of upheaval caused by pandemic-era lockdowns.
The vehicle — managed by UK buyout firm Charterhouse Capital — has only raised around half of its £1 billion target, a person familiar with the matter said.
Its backers have chosen not to tout the fund’s involvement in deals, another person said, and last year it quietly dropped China from its name.
It’s a far cry from the plaudits the UK-China Cooperation Fund drew at a Chinese New Year lunch hosted in London by HSBC in 2020, where guests including Beijing’s then ambassador to the UK and future British Prime Minister Liz Truss toasted its future.
“This is an important strategic initiative for both CIC and HSBC, who will be the two anchor investors in the fund,” HSBC Chairman Mark Tucker said at the event.
UK Visit
The initiative, designed to spur investment in small and medium-sized UK companies that wanted to expand into China, was first announced by the UK government in June 2019 to coincide with a visit to the UK by Chinese Vice Premier Hu Chunhua.
A press release from the time was called ‘Big wins for British businesses.’
After HSBC tapped Charterhouse to manage the fund, the buyout firm hired a star dealmaker called James Cocker from rival firm Lion Capital to run the vehicle, one of the people familiar said.
The plan was that HSBC and CIC would provide anchor commitments and then the rest of the money raised would be from other investors.
The pandemic struck just as the fund began asking investors for cash in early 2020.
This made it difficult for executives to travel to meet prospective investors, as well as for Charterhouse to visit CIC.
The relationship between the UK and China declined after the UK government criticized Beijing’s imposition of strict new security laws on Hong Kong.
Tensions also rose when Jeremy Hunt, a senior lawmaker, wrote an op-ed in the Times of London warning against China’s growing desire to reunify with Taiwan.
The fund closed money from its anchor investors CIC, HSBC and Charterhouse later that year and a regulatory filing shows that China Life Insurance Company has also backed the fund.
But the vehicle, which is still open to investors, has only raised around £500 million, the person familiar, who asked not to be identified discussing private matter, said.
Representatives for HSBC and Charterhouse declined to comment.
CIC didn’t respond to a request for comment.
Political Headwinds
By the time the fund started doing deals, it decided not to publicly announce them, in part because of the deteriorating relationship between the UK government and China, another person involved with the fund said.
When Charterhouse announced in January 2021 it had agreed to acquire Phastar, a data science company focused on clinical trials, no mention was made of the UK-China Cooperation Fund in the release announcing the deal, even though money from it was used to finance it, the second person said.
A deal announced in July for UK certification provider Amtivo was also completed using capital from the vehicle. Again, it wasn’t referenced in the release announcing the deal.
While China has recently eased its lockdown restrictions, there’s little sign of a thaw that could ease the geopolitical headwinds.
UK Prime Minister Rishi Sunak said in November that “China poses a systemic challenge to our values and interests,” and has refused to rule out sending arms to Taiwan to protect it from Chinese aggression.
By then, the fund had already changed its name to remove a reference to China, according to a regulatory filing.
Its new name: Charterhouse Opportunities 1.
–With assistance from Harry Wilson.
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