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China’s Safe to invest $2.5bn in TPG fund

Financial Times – China’s State Administration of Foreign Exchange has agreed to invest more than $2.5bn in the latest TPG fund, in what could be the largest commitment ever made to a private equity firm, people familiar with the matter say.

The investment by the Chinese entity, known as Safe, underscores the growing inclination of sovereign wealth funds to invest through private equity firms – rather than directly – to minimise the potential political backlash to their growing activity.

It also illustrates the growing importance of sovereign wealth funds to private equity firms at a time when pension funds and non-profit endowments are cutting back their exposure to leveraged buy-out investments.

Investments in private equity firms are usually not made public, but industry executives believe the largest previous investment in a private equity firm came from pension funds in the US states of Oregon and Washington. The two funds both invested about $1bn to $1.5bn in Kohlberg Kravis Roberts.

Safe declined comment.

In recent years, a growing percentage of the money for US private equity firms has come from overseas. In 2002, for example, 25 per cent of the money that Blackstone raised came from outside the US. In 2005, it increased to 40 per cent.

China Investment Corporation, another sovereign wealth fund, has been given authority to invest a small portion of China’s $1,600bn in reserves.

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