The China-CEE Investment Co-Operation Fund II (“Fund II”) announced its first closing with secured commitments of $800 M. The fund targets a final total capital commitment of $1 Bn for 2018. The geographical coverage of Fund II will be the 16 countries of Central and Eastern Europe from the Baltic States to Albania. CEE Equity Partners, which has five offices in the region (Bucharest, Budapest, Prague, Warsaw, and Zagreb) was appointed the Investment Advisor to Fund II.
Fund II builds on the experience of Fund I that was established in 2014 by China Exim Bank in partnership with other institutional investors from the CEE region to capitalize on investment opportunities in CEE countries. Fund II has the same investor base as Fund I, plus the Silk Road Fund. Since 2014 CEE Equity Partners has overseen 16 transactions by Fund I in 5 countries totaling over $500 M. One of them was the €4.5 М investment in the Bulgarian company Walltopia, a world leader in climbing wall design and manufacturing. Fund I focused chiefly on four sectors: specialized manufacturing, infrastructure, energy, and telecommunications.
The investment strategy of Fund II covers the same four sectors plus healthcare, tourism, education, and agriculture. The typical equity investment will range from $20 to $100 M with additional debt financing if appropriate, on an investment horizon of 5-8 years. The Silk Road Fund can co-invest with Fund II, so equity tickets greater than $100 M can be considered. Fund II’s preference is for well-managed, cash-flow generative and asset-backed companies poised for growth. Majority stakes are preferred, although significant minority stakes are possible. Fund II is unlikely to invest in operational turnarounds and privatizations.
