Contrarian To Complete 8 Billion New Funds To Raise CDH Sandwich Investment And Deepen Four Major Areas

In the field of mezzanine fund, 9 years of investment in CDH has recently completed a new fund-raising of the mezzanine fund.

In April 8th, the economic report of twenty-first Century was informed that CDH investment has recently completed the fifth phase of the fund-raising fund. The fund-raising scale of this fund exceeds RMB 8 billion yuan, which is 2.3 times of the fourth phase sandwich fund. At the same time, this is by far the largest sandwich fund in China.

"In fact, the fund-raising environment of the whole market has become rather difficult since the beginning of 2018, but LP has configuration requirements and will choose the GP to deploy funds. This is not the 28 effect, it has become a 19 effect." Hu Ning, managing director of CDH investment and Mr. Ding Hui's founding partner, told the twenty-first Century economic report.

During this period, LP is becoming more professional and will examine the fund and management team in many ways. They attach great importance to the long-term and stable development of funds and teams. At the same time, LP inspects GP for a longer time, and pays more and more attention to the post investment management of invested funds after investment.

"However, once LP is invested, it hopes to form a long-term partnership with GP." Hu Ning said. For Ding Hui, the five tier sandwich fund has already handed out a more satisfactory answer.

After the fundraising is completed, the five phase sandwich fund will mainly focus on the four major strategies of real estate, corporate business, special opportunities, mergers and acquisitions. Hu Ning revealed that this year, the CDH sandwich team will focus on opportunities for new infrastructure, urban renewal and non-performing assets.

Many types of LP choose to strengthen sandwich product configuration.

In the product mix of Blackstone, Caire, Apollo, KKR and other large private management companies, the proportion of interlayer and credit products reaches 25%-50%, while China's data is less than 10%, and the market growth is huge.

CDH investment is the early adopters of the domestic sandwich fund market. In 2011, it set up a sandwich fund with a stable cash distribution during the period and provided a back-end floating income, which further expanded its alternative management platform. Up to now, the CDH sandwich fund has set up 5 RMB funds, among which the first phase sandwich fund and the two mezzanine fund have all been withdrawn, and the net return of investors has reached 15.1% and 11.5% respectively.

The return of brilliant results has enabled CDH to invest in the five phase of the sandwich fund collection and continue to gain institutional LP trust. It is understood that the five tier mezzanine fund maintained 100% of institutional investors. Especially noteworthy is that venture capital continues to increase, and investment accounts for up to 60%. Among the 14 insurance investors, there are large central enterprises, state-owned assets, private enterprises and joint venture insurance companies. So far, the CDH interlayer has accumulated more than 8 billion 500 million yuan investment from 27 insurance companies.

Apart from the venture capital, the list of investors in the five phase of sandwich fund is also bright: not only has it introduced banks, trusts and other financial institutions, but also has introduced top parent funds, large industrial capital, pension and government funds, covering almost all the mainstream institutions in the market.

"I have high expectations for the continuous recognition of CDH interlayer in domestic insurance investors, and the further opening of investor markets such as bank financing subsidiaries." Wu Shangzhi, chairman of CDH investment, said: "by providing a sound return on cash flow, mezzanine funds can build differentiated advantages in the market."

Hu Ning told the twenty-first Century economic report that many different types of LP's configuration of sandwich products are being further strengthened. For venture capital LP, sandwich products have always been their favorite products. Under the new accounting standards, because of the slight change in the fair value during the period of mezzanine fund, we can resolve the concern of LP on the fluctuation of profits. Venture capital LP will consider increasing the allocation of mezzanine funds.

For bank financing subsidiaries, because of the demand for cash flow, they may also deploy a large number of mezzanine funds. In addition, some traditional equity fund investors will also consider the allocation of mezzanine funds, such as top parent funds and large industrial capital.

This year we will focus on new infrastructure, urban renewal and bad assets.

It is understood that in real estate, company business, special opportunities, mergers and acquisitions four core strategies, the CDH sandwich fund has completed more than 92 investment projects, the cumulative investment scale of more than 22 billion 700 million yuan, covering real estate, communications, security, education, pension and other industries and projects. Through careful judgement of asset value and cash flow, the CDH sandwich Fund aims to continuously seek investment opportunities with high certainty and security.

Hu Ning said that after 9 years of practice, the group has formed a unique understanding of investment strategy and risk control, and has accumulated rich experience. The team will focus on three aspects of new infrastructure, urban renewal and non-performing assets this year.

First of all, in the field of new infrastructure, the team began to study the layout based on the 5G industry chain 2 years ago, and the IDC assets of the first tier cities were heavily loaded up. As the core infrastructure of the information industry chain, the IDC project can provide good cash returns. The IDC quality enterprise incubated by Ding Hui interlayer has plans to land A shares in the near future.

Secondly, in terms of urban renewal, CDH focuses on the old layout of the big bay area and the rebuilt of the stock property. At present, more than 2 million 500 thousand cities have been invested in the urban renewal project in Shenzhen. "The market level and the value of property brought about by the integration of Tai Wan district is a very good opportunity for us." Hu Ning said.

Third, the bad assets have always been the investment direction of the CDH sandwich fund to hedge the downside risks of the economy. Using the counter cyclical investment thinking, we can get excess returns at a higher margin of safety.

Prior to that, CDH achieved good investment performance in the field of non-performing assets. Data show that in the past three years, CDH special opportunity investment projects 19, the investment amount of nearly 2 billion yuan, has recovered more than 1 billion 200 million yuan. Among them, the return on investment with non-performing assets as underlying assets has basically reached over 20%.

"In the current market environment, the judgment of the cycle and the control of risks are the competitiveness of the sandwich fund." Hu Ning concluded that "the impact brought by the epidemic is both a challenge and an opportunity. The market is not static, the risk is not static, for example, under the impact of the epidemic, network office instead of office centralized office, mapping to investment is reflected in the demand for office buildings into IDC demand. The total demand for office has not been reduced, but its structure has changed. We will always adhere to the most fundamental market rules and business principles, and will hedge market risks through rational asset allocation, and continue to create stable returns for investors.

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