HONG KONG (Reuters) - China private equity firm Nepoch Capital has erased its princeling backer He Jintao from the documents it shows investors after he was questioned in connection with a corruption investigation, sources have told Reuters.
Nepoch's distancing from its co-founder, son of former head of Communist Party discipline He Guoqiang, was a direct result of his being questioned earlier in May, said one of the sources, an investor in the fund.
A source close to He said the case was linked to investigations into Song Lin, the former chairman of state-run conglomerate China Resources, which has been accused of over-paying for assets.
There has been no indication that He has been or will be charged with any offense.
A source from an international bank that is considering an investment in a dairy farm with Nepoch said underwriters for that deal had shown it legal documents to prove He was no longer involved with the firm.
He said the bank's own internal due diligence procedures would otherwise have barred it from investing alongside Nepoch.
Nepoch did not respond to requests for comment, while He could not be reached.
President Xi Jinping's drive to rid China of endemic corruption has felled a number of high-profile figures, including former security chief Zhou Yongkang and scores of family members who stand accused of using his political clout for financial gain.
In the private equity industry, which has a long association with China's so called princelings - the sons and daughters of the country's elite - political connections and private gain have often gone hand in hand, which has proved a draw to investors.
Sources with knowledge of the matter have told Reuters that Nepoch's political connections were openly touted during its debut fundraising, and investors said the value of those links was demonstrated when it managed in 2012 to find its way as an investor in Alibaba Group Holdings, which last month pulled off the largest IPO in history.
"That deal showed us they really had the connections to land deals, and convinced us to invest in the fund," said the investor source.
Fifteen PE firms identified by Reuters that were either founded by a princeling or had princelings in senior roles raised at least $17.5 billion since 1999.
Though Nepoch has made a handsome profit from its Alibaba holding - more than four times its investment - its political and financial future is uncertain.
"It will be interesting to see if they can raise a second fund. It's not clear if they will," said the investor source.
Additional reporting by Matthew Miller and the Beijing newsroom; Editing by Will Waterman