China's sovereign wealth fund mulls supporting Investcorp in Middle East

China's sovereign wealth fund is in talks to back a roughly $800 million investment fund that will target stakes in Middle East companies, the latest sign of growing trade ties between the Gulf Arab oil exporter and the world's second-largest economy.

China Investment Corp. is working with Investcorp Holdings to inject money into the Bahrain-based firm’s pre-listing fund in the Gulf, according to people familiar with the matter.

The Chinese sovereign wealth fund’s investment in the fund, along with investments from other major sovereign wealth funds from Abu Dhabi and Saudi Arabia, could be announced as early as this month, according to the people, who asked not to be identified because the talks are private.

Investcorp plans expansion

The partnership with Investcorp is part of the Chinese fund’s plans to target more deals in the Middle East, the sources said. Investments from China’s sovereign wealth fund, which manages about $1.3 trillion in assets, and other sovereign funds have led Investcorp to raise the fund’s size from its initial target of $500 million, and the company also plans to expand the fund’s focus to include investments across the Middle East and Asia.

The Chinese sovereign wealth fund did not respond to a request for comment sent outside normal business hours. Investcorp also declined to respond to requests for comment.

Chinese Ambitions in the Middle East

China is also the largest buyer of Middle Eastern oil, and the country is increasingly looking to deepen its ties with the Middle East amid trade tensions with the United States and a slowdown in its own economy. Those ties were strengthened after Chinese President Xi Jinping attended a regional summit in Saudi Arabia in 2022.

Investcorp, the Middle East’s largest alternative investment manager, has about $50 billion in assets under management, according to its website. It is also expanding into Asia, reportedly partnering with the private equity arm of the Fung brothers’ family office in 2022 to create a $500 million fund to invest in mid-cap companies across China’s Greater Bay Area.