The China Healthcare Growth Fund aims to capitalise on a partial opening of China's healthcare system to foreign investment.
The private equity fund will acquire hospital management contracts from the government, with the aim of turning state-owned hospitals that have underperformed through lack of investment into well-run profitable businesses over a 15-30-year period.
"Since government healthcare reforms last year, about 19,000 urban hospitals in China are now available for investment. We are among the first to do this and see it as an exciting investment," said Henry Talbot-Ponsonby, managing partner of London-based Venture Capital Partners, responsible for the fund placement.
The fund, which has a seven-year term and is domiciled in the Cayman Islands, will be run by Beijing-based Chinese managers. It aims to raise $60m-$100m and will charge 2 per cent a year and 20 per cent performance fee.
"Urban healthcare is a hot topic in China as it will have 200m people over the age of 60 by 2015 and 325m are forecast to migrate to urban areas by 2025," said Mr Talbot-Ponsonby.
The fund is targeting a 30 per cent internal rate of return. It will make money from the hospitals it manages through a fixed annual payment from the state of Rmb3.25m ($487,074), 60 per cent of the hospital's operating profits, and pharmaceutical brokerage revenues, said Mr Talbot-Ponsonby.
The fund plans to exit its investments through stock market listing of the portfolio of hospitals or by selling individual hospitals or the whole portfolio to a "strategic or financial investor".
Mr Talbot-Ponsonby said the fund had already been approached by hospital operators, pharmaceutical companies, medical device manufacturers and financial investors.
