Trustar Capital has reached a first close of USD 900m on its fifth China buyout fund, having announced the first investment – in Guilong Pharmaceutical, a domestic manufacturer of over-the-counter throat treatments – last month.

Trustar has not altered its target of USD 3.5bn for Trustar Capital Buyout Fund V, set on launching the fund in mid-2022, according to three sources familiar with the situation, who confirmed the first close. They added that the capital was committed months ago, but the GP delayed the first close – the point at which the investment period begins. This is sometimes referred to as a dry close.

Trustar declined to comment on fundraising.

The private equity firm has another high-profile deal pending: a portion of its holding in McDonald’s China, a Fund III portfolio company, will be rolled into Fund V with the rest going into some form of co-investment vehicle, as previously reported. The transaction would facilitate a full exit for Fund III while placing a seed asset into Fund V that may support fundraising efforts.

The Carlyle Group, which invested in McDonald’s China alongside Trustar and the Hong Kong arm of China’s CITIC Group in 2015, sold its stake earlier this year at a USD 6.4bn valuation, securing a 6.7x return. Trustar owns 52% of McDonald’s, having taken out CITIC’s position.

Trustar’s first close comes at a bleak time for China fundraising amid concerns about geopolitics, uncertain exit prospects, and slowing economic growth. Commitments to US dollar-denominated funds reached USD 12.8bn in 2023, according to AVCJ Research. This compares to an annual average for the prior years of USD 18.5bn. The running total for 2024 is USD 1.7bn.

A surge in renminbi fundraising activity took China’s overall total to USD 75.4bn last year, up from USD 66.8bn in 2022.

In the past two years, only six GPs have closed US dollar funds larger than the Trustar first close. CPE and Primavera Capital Group closed their fourth funds on USD 3.2bn and USD 4bn, respectively, in September 2022 and May 2023. Much of the capital was raised before the outbreak of war in Ukraine. Temasek Holdings-supported True Light Capital closed its debut fund on USD 3.3bn in September 2023.

On the venture capital side, HongShan’s latest vintage amounted to USD 8.8bn across four funds, closing in July 2022, while Qiming Venture Partners and Matrix Partners China raised USD 2.5bn and USD 1.6bn.

Trustar – which rebranded from CITIC Capital Partners in 2021 – is an affiliate of CITIC Capital Holdings. The firm currently manages USD 8.7bn in committed capital. Its fourth flagship fund closed on USD 2.8bn in 2019. This followed the raising of USD 1.57bn for Fund III.

In 2024 to date, Mergermarket has reported on sale processes involving Trustar portfolio companies such as pallet business Loscam – jointly owned with FountainVest Partners – condiments maker Amoy Food, and skincare player Erno Laszlo. Lanocorp, a subsidiary of Trilogy International, is also up for sale.

Amoy ranks highest on Mergermarket’s Likely-to-Exit (LTE) algorithm* with a score of 70 out of 100. Cosmetic packaging maker Axilone is second with 67, and Trilogy – which owns a portfolio of skincare brands – is third with 53.

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.