UPDATE 2-China's Hony Capital raises $4 bln in new funds

Thu Jan 12, 2012 6:22am EST

* Hony almost doubles size of dollar, yuan funds

* Raises $2.4 bln from intern'l investors in 4 mths

* NSSF among yuan fund investors - source (Recasts with company confirmation)

By Samuel Shen and Stephen Aldred

SHANGHAI/HONG KONG, Jan 12 (Reuters) - Hony Capital, one of China's most successful private equity funds, said on Thursday it had raised nearly $4 billion from investors, defying the increasingly tight fund-raising climate.

Hony said in a statement it had raised close to $2.4 billion for its fifth dollar fund, and 10 billion yuan ($1.6 billion) for its second local currency fund, confirming what sources close to the situation earlier told Reuters.

Those numbers are almost double the sizes of previous dollar and yuan funds for Hony Capital, which is backed by Legend Holdings Ltd.

"Changes that were not found in foreign markets over the past two or three decades are taking place in China," said John Zhao, CEO of Hony. "The emergence of China provides rare opportunities for China's PE insiders to explore a new way with Chinese characteristics based on our experience in the Chinese market."

The speed of Hony's fundraising - which began in September for the dollar fund with a target of $2 billion - underlines the appetite of international investors for investing in China through funds like Hony which have an established track record.

With its dollar fund, Hony said it will continue to focus on reform of China's state-owned enterprises, as well as growth capital investments. Its investments include China Glass, Zoomlion and the cross-border acquisition of Italian concrete machinery maker Compagnia Italiana Former Acciacio S.p.A.

Private equity firms around the world have found it tougher to raise money since the global economic downturn in 2008, although Asia-Pacific has seen its share of global fundraising rise to 22 percent from just 9 percent in 2008, Preqin said in a recent report.

Europe accounted for 23 percent of fundraising, according to Preqin.

A small portion of the Hony fund may be used for overseas investment, the sources said. After years of focusing on their home turf, Hony and other China funds are expanding abroad, slowly but steadily moving across Asia and into parts of the Western market.

Zhao previously told Reuters that technology companies in the United States, Europe and Japan could improve their value significantly if they could get their products into China. [IS:nL3E7HG1EY]

The private equity firm has previously raised more than $2 billion in four dollar funds from investors including Goldman Sachs Group Inc, Temasek Holdings Pte Ltd and Stanford University since 2003.

Its previous $1.4 billion fund closed in 2008.

Hony's first yuan fund raised 5.2 billion also in 2008, according to the firm's website. The new fund's investors include China's National Social Security Fund (NSSF), which invested 3 billion yuan. ($1 = 6.315 Chinese Yuan) (Editing by Chris Lewis and Hans-Juergen Peters)

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