Exclusive: 'Princeling' firm holds secret stake in giant fund house Cinda

With the giant state-owned fund house Cinda Asset Management planning to go public in Hong Kong this year, two behind-the-scenes investors in the company, including a private equity fund co-founded by the grandson of China's former state head Jiang Zemin, have been pushed into the spotlight.

Three well-placed financial industry sources have told the South China Morning Post that the Carlyle Group and Boyu Capital both made indirect investments to allow them to own minority stakes in Cinda, which was established in 1999 as one of the mainland's Big Four state debt clearers and is based in Beijing.

In March 2012, Cinda brought in three new so-called strategic investors - UBS, Citic Capital, an investment firm partly owned by China Investment Corp, the mainland's US$300 billion sovereign wealth fund, and Standard Chartered - in a deal worth around US$1 billion, for a combined stake of less than 10 per cent in the business.

What surprised the financial community more was the discovery later that after that deal, Washington-based private equity firm the Carlyle Group, and Boyu Capital, a billion-dollar private equity firm based in Hong Kong and partly funded by Li Ka-shing, Asia's richest man, each struck deals to become the ultimate holders of their own stakes in Cinda.

Two of the three sources familiar with the matter told the Post that UBS sold part of its holdings in Cinda, which the Swiss bank obtained through its direct investment in 2012, to Carlyle, one of the world's largest private equity firms.

Boyu also made a sophisticated financial arrangement with Citic Capital to obtain part of the stake in Cinda originally held by Citic, sources said.