Report: Chinese regulators veto CITIC, Starr fund proposal

Regulators have reportedly rejected the joint venture, and instead allowed CITIC to launch a private equity arm expected to raise RMB 6bn for its first fund.

The Chinese government has rejected plans for a private equity fund backed by Starr International and China CITIC Securities and instead has paved the way for CITIC Securities to raise its own RMB 6 billion (€675 million; $873 million) fund, Reuters reported.

The Maurice Greenberg-led global investment firm and CITIC Securities had planned to launch a 50-50 joint venture fund with an initial fund size of RMB1 billion.

The China Securities Regulatory Commission rejected the joint venture proposal as it did not want to set a precedent for other foreign private equity firms to follow, two sources told Reuters. The regulators have instead allowed CITIC Securities to set up its own private equity funds management company, CITIC Private Equity Funds Management, which is expected to raise RMB6 billion for its first private equity fund.

Had the joint venture gone ahead, it would have been the first private equity fund launched in partnership between a foreign firm and a domestic brokerage.

Chinese regulators have loosened controls on securities firms investing in private equity, either directly or though managed funds. Last year, the China Securities Regulatory Commission allowed CITIC Securities and China International Capital Corporation to launch direct investment activities in unlisted companies. Subsequently, Huatai Securities and Guosen Securities were permitted to invest in private equity earlier this year.

CITIC Group’s alternative investments arm CITIC Capital already manages separate private equity funds focused on China, Japan and the US, and is currently raising $500 million for its second China-focused private equity real estate fund.

Starr International and CITIC Securities could not be reached for comment.