Jack Ma bucks China private equity downturn, raises $2.5bn

Investors show faith in the Alibaba founder's golden touch as his Yunfeng Capital pulls off a lucrative funding round amid a wider downturn. E-commerce rival Suning is among the investors.

What are the chance of a China-born private equity fund successfully closing a multibillion-dollar fundraising, especially as liquidity notably dries up? For most, the odds are extremely long.

But when you take the Alibaba founder’s influence into consideration, it may be a different story.

Yunfeng Capital, a Shanghai-headquartered private equity firm co-founded by Jack Ma, disclosed on Tuesday that it had closed the $2.5 billion fundraising. According to a filing to the US Securities and Exchange Commissionits, the cash will add dry powder to its Yunfeng Fund III, incorporated in November 2017.

Co-founded by the Chinese e-commerce guru and David Yu — chairman of Hong Kong-listed YF Financial Holdings — in 2010, the private equity firm covers a wide spectrum of target sectors, including media, telecommunication, entertainment, consumer and healthcare.

Backed by China’s largest e-commerce company, the private equity fund’s portfolio companies include several unicorns in their respective areas – Ant Financial from the fintech space, leading electronics manufacturer Xiaomi, electric car-maker XPeng, and leading online English teaching platform VIPKID, among others.

As Alibaba expands its e-commerce ecosystem to capture more early birds across a wide range of emerging sectors, Ma clearly sees a chance to further expand his investment landscape.

According to data from Crunchbase, Alibaba has established at least three other sizable investment arms to seize opportunities in line with the technological revolution. They are; Alibaba Capital Partners, Alibaba Innovation Ventures, and Alibaba Entrepreneurs Fund (Hong Kong & Taiwan).

In addition to build up investment capability from the inside, the e-commerce giant is also leveraging the capabilities of other organisations through cooperation — even with competitors.

HONEYMOON WITH SUNING

Alibaba is investing hand in hand with a domestic e-commerce rival, Suning.com, with three major investments in the past month.

Although Yunfeng Fund III has not revealed its investor roster, FinanceAsia found in a Suning.com statement to the Shenzhen Stock Exchange in late July that it had committed up to $210 million to the private equity fund.

“We expect to further diversify our investment layouts across multiple sectors including intelligent technology, which would help develop the company’s ecosystem in the consumer area in the context of fast-growing technical revolution,” Suning said in the statement.

The investment was made just two days after Alibaba announced a strategic investment in Suning Sports, which was reportedly worth $600 million and was also carried out via Yunfeng Capital, according to Crunchbase.

Last weekend, the two Chinese consumer flagships together participated in Shanghai-listed broker Huatai Securities’ private placement, with Alibaba and Suning allocating Rmb3.5 billion ($513 million) and Rmb3.4 billion respectively.

Suning’s philosophy is clear, as it said in the statement on the Yunfeng Fund III investment that the investment would combine "strengths and resources between Suning and related companies, which will be a strong supporting factor in the process of establishing our ecosystem".

Alibaba, on the other hand, has every reason to think the same way for the sake of mutual interest.

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