U.S. venture capital heavyweight IDG Capital Partners (IDGVC) is considering setting up a 4 billion yuan ($586 million) fund denominated in yuan, a top executive said on Monday.
Suyang Zhang, a general partner with IDGVC, said China's national pension fund, the National Social Security Fund, is a potential investor.
We are thinking of setting one up, Zhang told Reuters in an interview, adding that it will be within a year.
We have spoken with the NSSF and we hope to help manage their funds, Zhang said.
Zhang said IDGVC is currently awaiting government approval and the NSSF mandate for the fund, but provided no further detail on the exact timeframe and on what the fund's focus would be.
China's $80 billion NSSF is a fund of last resort for the country's patchwork of under-funded provincial pension schemes.
Last August, Reuters reported that CITIC Capital, an investment arm of China's largest financial conglomerate is in talks with NSSF to launch a yuan-denominated private equity fund.
Beijing has pledged to develop yuan funds run by Chinese managers, to help reduce companies' dependence on bank financing.
IDGVC, which has about $2.5 billion under management, invests in early-to-growth-stage companies with a focus on Internet, telecommunications, wireless communications and digital media.
It was one of the early investors into China search giant Baidu Inc (BIDU.O), Internet portal Sohu.com Inc (SOHU.O) and Internet travel portal Ctrip.com (CTRP.O).
Zhang is eyeing firms in healthcare, consumer and transportation sectors because they were more resilient to economic cycles.
When the economy is bad, your health worsens and you see a doctor, when the economy is good, you still see a doctor, to ensure you stay healthy, Zhang said.
IDGVC recently invested China Biologic Product (CBPO.OB), a firm that makes blood products.
According to Zero2IPO, a data service provider to the industry, domestic and foreign venture capital yuan funds raised the equivalent of $402 million in the second quarter, or 29.4 percent of total funds raised during the period.
IDGVC is also looking to exit 3 to 4 firms this year, one or two will be through initial public offerings in overseas markets and one to be listed on the Shenzhen Stock Exchange.
Zhang said the firms to be exited are in the healthcare and consumer sector.
We are also planning to invest between $80-$100 million into 12-15 companies in the second half of the year, Zhang said, adding that two of the investments will be $30 million each.