Hungary - China-Central & Eastern Europe Middle Market Private Equity Fund

While CET advises on individual projects, we would like to establish a private equity (PE) fund with a Chinese partner to invest in Central-Eastern Europe (CEE). The fund could be modeled on CET's 7 prior co-managed funds: partner provides capital and investment strategy (eg target sectors for organic, joint venture or acquisitive expansion in China/BRI area). If partner is the sole capital provider, then partner controls investment decisions. If partner wants CET to source other investors (CEE state, bi-/multi-lateral, private institutional, etc), then partner would share control of governance with other investors via the investment committee or board of directors (IC/BD). Either way, CET would source, analyze, diligence, execute and exit investments subject to the approval of partner/IC/BD. The $1b China-CEE (ChinaExim, Silk Road Fund, HungarianExim) and $2b Sino-CEEF (ICBC, Fosun, Royal Eagle) funds prefer investments of $50/100m+, in intense competition with big PE firms in Europe. However, there are no China-CEE funds targeting the $10-50m segment on which CET focuses, which offers: (i) more opportunities (particularly given the large number of firms privatized/founded after 1990 from which founders/owners now want to retire/exit), (ii) technology-rich but capital/expansion/management bandwidth-poor firms, (iii) less competition from other PE funds, (iv) lower entry valuations, and (v) higher returns (CEE E150-300m funds avg IRR: 24%, E300m+ funds IRR: 7%. Source: EBRD).