Dignari Capital garners $476.5m for China Credit Fund II

The Hong Kong-based credit manager is aiming to reach a final close on $500m by the end of H1 2019.

Dignari Capital Partners, a Hong Kong-based private credit investment manager, has garnered $476.5 million from at least nine investors for DCP China Credit Fund II, its second China-focused credit fund, which is targeting a final close on $500 million, a regulatory filing on 8 January shows. 

As PDI previously reported, Fund II held a first close on $262.2 million in February 2018 backed by at least six investors. The fund has started deploying capital and has a five-year fund life with a target gross internal rate of return of 20 percent, according to a source familiar with the matter.

The firm closed its first China credit fund, DCP China Credit Fund, on $256.1 million in December 2014, according to another Securities and Exchange Commission filing.

Dignari is managing more than $700 million as of 14 January, according to PDI data. The firm specialises in credit and special situations investments in the region with a focus on distressed corporates in China and Hong Kong. It targets mezzanine debt and subordinated loans to corporates in the Greater China region, including Hong Kong, for the DCP China Credit Fund series.

The firm could not be reached for comments on fundraising by the time of publication.

Dignari’s typical credit investment size ranges from $50 million to $75 million, and it is aiming to make eight to 10 investments from its DCP China Credit Fund series, according to the source.

In addition, the credit fund manager has structured a feeder fund for non-US investors, which prefer to invest in Fund II, the master fund, via the feeder structure due to tax and other regulatory reasons. Another filing shows that DCP China Credit Fund II has a feeder vehicle sized at more than $380.5 million. The feeder fund is solely investing in the master fund, DCP China Credit Fund II.

Typically, feeder funds have ownership interests in offshore master funds, which is a common practice when structuring a fund vehicle in the hedge fund industry.

For instance, other fund managers in the region have structured a feeder fund to offer a channel for Chinese investors using Chinese yuan in additional investment opportunities outside of China, according to a statement from Los Angeles-based law firm, Paul Hastings.