In this episode of China Money Podcast, guest André Loesekrug‐Pietri, founder of A Capital, explains why his fund's China-Europe cross-border strategy will thrive even in the current world economic malaise, how did he become attracted to the Chinese markets, and why his new fund was able to secure two star institutional investors.
Listen to the full interview in the audio podcast, watch an abbreviated video version, or read an excerpt.
Q: First, a brief introduction of A Capital?
A: We are a European growth capital fund focused on investing in European companies that have strong growth potentials in China. Once we make the decision to invest in (a European company), we bring a Chinese strategic co-investor that has the resources and expertise to make this European company succeed in China.
Q: You have both a Euro fund and a RMB fund. The Euro fund has a target size of €250 million. How much have you raised so far?
A: We have raised a significant amount of that. Our fund is relatively new, just a bit over a year old and we've done two deals so far. Several months ago, we had our first closing with two major investors, one from China and the other one from Europe.
Q: These are the Belgian Federal Holdings and China Investment Corporations?
A: Yes, both of them invested in our Luxemburg fund. Our fund is actually a regulated fund, even thought only funds with over €500 million are required to be regulated in Europe. We decided to be regulated by the Luxemburg Financial Authority because of the quality of our investors.
We have a second, RMB fund that we have set up in cooperation with the Beijing Municipal government, specifically, Beijing's Office of Financial Works. The fund is unique in that it is allowed to raise money in RMB in China and invest overseas. The two funds invest in complete parallel terms. The RMB fund is a tool for us to allow Chinese LPs to invest overseas through our vehicle.
Q: There are several funds with similar strategy to yours. Mandarin Capital has a China-Italy/China-Europe focus, whose founder was featured on our program previously; Cathy Capital has a China-France focus. What are some similarities and differences between you and them?
A: First, this is a new strategy. It's always good to have someone else with whom you can benchmark yourself. I'm both German and French. There are around 120 private equity funds in Germany, and maybe around 140 funds in France. If there are two or three funds doing cross-border deals, it's only healthy.
Secondly, our focus is the whole European continent. Our strategy is focused on one theme: urbanization, which is a trend that will continue to be very strong in the next twenty to thirty years in China. We invest in three sub-areas: 1, Retail and consumer brands. Our two done deals in Club Méditerranée and Bang & Olufsen are in this category. 2, Transportation and logistics. 3, Quality of life including food safety, environmental technology and healthcare.
Europe has the expertise and resources in all these areas to offer. Germany has automotive expertise. The Nordic countries and France have water treatment technologies. In France and Italy, there are solid consumer brands.
Lastly, once we have taken the decision to invest, we bring along a Chinese co-investor who has the industrial skills needed to create true value. We then work hard to make sure these synergies are realized during the lifetime of the investment.
Q: With Europe saddled with the Euro crisis and China's economy slowing, how will your ability to successfully implement your strategy be affected?
A: Our strategy is to invest in European companies that have strong potential to grow in China. It was a niche strategy in Europe until two or three years ago, because until then companies were able to grow well within Europe. Now, with poor growth prospective in Europe, to be successful in China is no longer a nice-to-have, but an absolute obligation.
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