CDH Investments

In 1992, Wu Shangzhi, then Senior Investment Officer at the World Bank Group's Direct Investment Division, decided to establish an investment firm in China. He approached GIC with a fund raising proposal. Instead of considering an equity commitment, GIC suggested Wu to join China International Capital Corporation, an investment bank that GIC was involved in the preparatory work related to the firm's establishment at that point. Wu led the direct investment business at China International Capital Corporation until it was split off by the firm in 2001, when China Securities Regulatory Commission prohibited investment bank from doing private equity investment.[10]

In 2002, CDH was established with six founding partners including Wu Shangzhi and Jiao Zhen, who had worked together at China International Capital Corporation's Direct Investment Division since 1995. Other shareholders include GIC, China National Investment & Guaranty Co Ltd, and Capital Z Partners.[11] CDH have kept all the six founding partners within the firm to this day,[6] despite famously losing its head of venture capital, Wang Gongquan, who ran away with his mistress.[12][13]

In 2003, CDH raised only $102 million for its first standalone fund, but quickly found its way into a series of successful China deals, including stakes in sportswear company Li-Ning, display advertising firm Focus Media and Mengniu Dairy. That first fund returned around 3.5 times its investors' money, according to data seen by Reuters, making it one of the top performing funds in China, and enabling it to raise capital for a series of bigger funds.[12]

In 2006, CDH and Goldman Sachs invested $256 million in a controlling stake in a struggling meat producer, then known as Shuanghui Group, along with Temasek and New Horizon Capital.[14] That buyout deal, one of the first of its kind in China, sparked controversy as opponents claimed the country was selling assets too cheaply to foreign investors. Goldman sold half its stake back to CDH in 2009 for five times what it originally paid.[15]

CDH's performance attracted large institutional investors into its funds, including California Public Employees' Retirement System and Canada Pension Plan Investment Board. 75 percent of CDH's private equity funds now come from international investors.[12] With a target cap at $2 billion, CDH's fifth USD PE fund was closed at a hard cap of $2.5 billion due to over-subscription.[16]

CDH's family of funds includes private equity, venture capital, real estate, mezzanine and credit products.

Walter, Carl E.; Howie, Fraser J. T. (2011). Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise. Singapore: Wiley. ISBN 978-0470825860.

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