Receive the latest news from Goldman Sachs for free
we will send you myFT Daily Digest Email summary of the latest information Goldman Sachs Every morning there is news.
A fund set up by Goldman Sachs using Chinese government money has bought a string of U.S. and U.K. companies, including one with a cybersecurity business that provides services to the U.K. government, despite heightened tensions between Beijing and the West.
The Wall Street bank has used cash from a $2.5 billion private equity “partnership fund” it set up with sovereign wealth fund China Investment Corp in 2017 to strike a deal, according to multiple people with direct knowledge of the fund and its operations. closed 7 transactions.
The deals include a startup tracking global supply chains, a consulting firm advising on cloud computing, a drug testing company and a maker of artificial intelligence, drones and electric vehicle battery systems. While the bank announced it had invested in the companies, it did not say the deals were at least partially funded by Chinese funds.
The deals highlight how private equity funds are helping sovereign wealth funds take indirect stakes in companies in key industries as Western governments step up scrutiny of foreign direct investment, especially from China.
Lloyd Blankfein, the bank’s then chief executive, launched the U.S.-China Industrial Partnership Fund during Donald Trump’s state visit to Beijing in 2017, saying the The fund will help address Washington’s concerns about the U.S.-China trade imbalance by investing Chinese capital in U.S. companies.
The bank said CIC would be a “major investor” in the fund and play an active role in helping companies it acquires expand in China.
Despite rising tensions between Beijing and the West in recent years, Goldman has ramped up the fund’s activity, making four investments in 2021 and one last year.
In 2021, Goldman Sachs used a partnership fund with CIC to finance its acquisition of LRQA, the inspection and networking arm of Lloyd’s Register, the British maritime classification group. LRQA provides inspection and certification services across the aerospace, defense, energy and healthcare industries, among others.
That business includes cybersecurity group Nettitude, which says on its website that it is a UK government-approved service provider that helps “strengthen government and defense organizations around the world”. Its work includes “ethical hacking,” in which its employees attempt to break into clients’ systems to assess their vulnerabilities.
In the LRQA deal and others, the Goldman-CIC fund invested alongside separate private funds managed by the bank, implying relatively little financial involvement from the Chinese government.
But sovereign wealth funds have a closer relationship with the companies they acquire than the typical investor in most buyout funds.
“China accounts for 40% of the global certification market, and we are currently underrepresented in that market, and we are looking to address this and build on the [Goldman-CIC] LRQA spokesman said. He said Nettitude had no business in China, had no plans to set up there, and had no interaction with CIC.
Goldman Sachs said in a statement: “The cooperative fund is an American fund managed by an American manager and managed in compliance with all laws and regulations . . . It continues to invest in American and global companies, helping them increase sales in the Chinese market .”
A British official said the government could not comment on any specific acquisitions given the “quasi-judicial” nature of its investment review powers. But they added: “When we identify problems, the government will not hesitate to use our powers to protect national security.”
The fund has also invested in U.S. company Cprime, which provides consulting services for cloud computing; Parexel, a drug testing company; Project44, a startup that tracks global supply chains; Aptos, a retail technology group; Products from Visual Comfort & Co and California manufacturer Boyd Corporation include cooling systems for machine learning and drones.
The Project44 founders disclosed the Chinese fund’s investments to The Wall Street Journal in 2021, and Reuters reported on Boyd’s investments in 2019. The fund’s involvement with five other firms was previously undisclosed. Except for LRQA, none of the seven companies responded to requests for comment.
CIC is also a member of the fund’s “Limited Partner Advisory Board,” a term used in the private equity industry to refer to a group of key investors in a fund who, although they don’t make investment decisions, can contribute to They ask for advice.
Taiwan’s oldest insurer, Taiwan Life, Denmark’s ATP Pension Plan, U.S. pension management company Minnesota Investment Board and several U.S. charitable foundations have also pledged donations to the fund. CIC and Taiwan Life did not respond to requests for comment. The Minnesota Investment Commission and ATP confirmed that they are investors in the fund.
Founded in 2007 to invest Chinese state funds, CIC has assets of $1.35 trillion by the end of 2021. Nearly half of its global portfolio is invested in alternative assets such as private equity, according to its website.
The Goldman Sachs fund is one of several so-called “bilateral funds” set up by CIC and international investment groups to strike deals in its home country and help increase its investment in Western companies.
Goldman Sachs has maintained a cooperative relationship with CIC. The bank’s chief executive, David Solomon, met Qi Bin, CIC’s executive vice president, and Peng Chun, its chairman, in March, according to a CIC statement.
Additional reporting by Cheng Leng, James Politi and Jim Pickard
