March 14, 2012 / 10:01 AM / 7 years ago

INTERVIEW-Fidelity to launch its biggest China VC fund

By Samuel Shen and Kazunori Takada

SHANGHAI, March 14 (Reuters) - Global asset manager Fidelity Investments plans to launch its biggest China venture capital fund next year worth at least $250 million despite on-going market volatility, underlining its confidence in the country’s growth outlook, a senior executive said.

The new fund will be managed by its unit Fidelity Growth Partners Asia and will invest about half of the capital in healthcare firms and the remainder in consumer and information technology (IT) sectors, Norman Chen, a partner of Fidelity’s Greater China investment unit, told Reuters.

Unlike most other venture capital firms, Fidelity Growth Partners invests Fidelity’s own capital.

“The consumer wave in China is undeniable and we see huge opportunities,” Chen said, adding that Fidelity, which has been traditionally focused on healthcare and IT in China, started expanding into the consumer territory over the past year.

Fidelity Growth Partners, which has been investing in China for 16 years, is planning the new fund also because it will have fully invested the $450 million in its three exiting China funds by the end of this year, Chen said.

Fidelity, which has backed Chinese companies including Wuxi AppTech and Ltd 1688.HK, is also seeking to invest in China using the Chinese currency, the yuan.

Chen said Fidelity has applied for a licence under the country’s newly-launched Qualified Foreign Limited Partner

(QFLP) scheme, which would allow it to convert U.S. dollars into yuan for investment, suggesting the move would enable it to access deals more easily in China’s competitive private equity market.

Fidelity, which competes with rivals such as Vivo Ventures and IDG Technology Venture Investment, is expanding in China at a tough time for venture capital and private equity firms as global market volatility makes exits difficult and China’s economic slowdown hurts their portfolio companies.

But Chen brushed aside such concerns, saying Fidelity’s goal is to help build leading companies in China leveraging its global resources, rather than to make quick money.

“The money comes from Fidelity’s own balance sheet. It means that we can take a very long-term perspective in the market place because we’re not in a hurry to exit,” Chen said, adding that the fresh capital commitment is a show of confidence by Fidelity in China’s growth potential.

Illustrating Fidelity’s unique investment approach in China, Fidelity has helped establish two pharmaceutical start-ups in China — Hua Medicine and Innovent Biologics – with an investment horizon of at least five years in both cases.

“This is the time for innovation in China,” Chen said, citing catalysts such as government support, rising demand for new products from Chinese drug companies and the rapid-growing healthcare market.

All these factors point towards the need for more drugs and more innovation, he added.

(Editing by Jacqueline Wong)

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