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Hillhouse Raises $10.6 Billion for Latest Private Equity Fund

The “heavily oversubscribed” fund will target investments in the healthcare, consumer, technology, and services sectors, with a focus on Asia.

Hillhouse Capital Group, an Asian alternative investment firm that has backed Airbnb and Tencent, has closed its latest fund at $10.6 billion.

The Hong Kong-based Hillhouse announced late Tuesday the close of its “heavily oversubscribed” Fund IV, which will target global investments in the healthcare, consumer, technology, and services sectors but focus primarily on Asia.

One of the limited partners invested in the fund was the San Francisco Employees’ Retirement System, which finalized a $100 million investment on July 13, according to minutes from an August board meeting. Many of the other investors in the fund were endowments and foundations, and “a lot of existing investors were involved,” according to a spokesperson for Hillhouse.

“We are deeply grateful for the ongoing trust of our partners,” said Lei Zhang, Hillhouse’s founder and chief executive officer, in a statement. “We look forward to working with innovation-minded, world-class businesses and management teams seeking to deploy technology-driven solutions to create value for all stakeholders.”

[II Deep Dive: Searching for Diversification in Private Equity? Look to Asia]

Hillhouse, founded in 2005 with $30 million in seed money from the Yale University endowment, has been a leading alternative investor in Asia, topping II’s 2016 list of the 25 biggest hedge fund managers in the region. Its latest fund is among a a growing number of private equity funds targeting Asia: Asia-focused funds accounted for a quarter of private equity assets under management, or $722 billion, at the end of 2017, according to Preqin data released on Wednesday.

While Preqin reported that Asia-focused funds overall have yet to see a positive net cash flow, the data firm said their returns have been strong: For vintage years 2010 through 2015, these funds had median returns since inception of 12 percent or higher, according to Preqin. For vintage year 2015, Asian funds had a median return of 17 percent since inception – beating out European and North American counterparts.

“Although investors have yet to see the same returns of cash in Asia than they have for North America- and Europe-focused funds, Asia-focused private equity funds’ returns rival those of more established regions, pushing the region to see strong capital distributions in recent years,” said Christopher Elvin, head of private equity at Preqin, in a statement.

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