(Bloomberg) -- Hillhouse, the Asia-based investment firm started with Yale University endowment backing, is gauging international investor interest for what is expected to be a multi-billion dollar fund to buy beaten-down Chinese stocks.

Hillhouse has sounded out potential investors about a three-year fund, according to people familiar with the matter who asked not be identified discussing private information. The talks are in early stages and the details have yet to be finalized, the people said. 

A Hillhouse spokesman declined to comment. 

The new fund would be a big contrarian bet for Hillhouse, which manages more than $100 billion in public and private market investments, after Chinese stocks were pummeled by a slew of factors from regulatory crackdowns to sluggish growth in the world’s second-largest economy. A gauge of Hong Kong-listed Chinese companies has slumped 41% since the end of 2020, the worst performer among 92 major stock indexes tracked by Bloomberg.

This wouldn’t be the first time Hillhouse has tapped investor money to go bargain hunting. In 2018, it sought billions of dollars of capital commitments for its flagship Gaoling Fund and the Hillhouse China Value Fund when investors fled Chinese stocks. The exact amount gathered isn’t known.

The Chinese government has taken steps to bolster the economy in recent months, ending the crackdown on technology companies and easing restrictions on the slumping housing market that has weighed on consumer confidence. It also cut the stamp duty on stock trades for the first time since 2008 and pledged to curtail the pace of initial share sales to shore up the market.

Hillhouse, founded in 2005 by Zhang Lei, was an early backer of once high-flying Chinese technology companies such as Tencent Holdings Ltd. and JD.com Inc. The sector has been battered more recently, dragging the Nasdaq Golden Dragon China Index to its lowest price-earnings multiple in eight years during the second half of 2022.

Hillhouse’s public investment arm assets tumbled by a third last year, according to US regulatory filings. HHLR Advisors Ltd.’s assets fell to $41.4 billion, while assets of Hillhouse Investment Management Ltd., the unit that focuses on less liquid investments, edged up 2.2% to $44.7 billion. The filings did not account for asset flows from those two to Hillhouse entities that were not registered with the US Securities and Exchange Commission.

Read more: Hillhouse’s Public Investment Assets Drop By One Third 

The latest capital raising idea is being hatched even after some North American pensions halted new investments in China or reduced allocations. China dropped to 19th place on the $309 billion California State Teachers’ Retirement System’s ranking of country exposure by May, down from fourth at the end of 2020. The Ontario Teachers’ Pension Plan announced earlier this year it was shutting an Asia equity investment team in Hong Kong, cutting five jobs.

US Commerce Secretary Gina Raimondo last week argued that China is driving away American companies.

“Increasingly I hear from businesses, ‘China is uninvestible because it’s become too risky,’” Raimondo told reporters during a visit to China.

Some economists and investors are concerned that China is entering a Japan-style phase of a “balance sheet recession,” with businesses and consumers spooked by falling asset prices opting to pay down debt instead of investing or spending.

©2023 Bloomberg L.P.