CapitaLand Ltd., Southeast Asia's biggest developer by sales, said it set up a US$1 billion private equity fund to mainly invest in properties in Chinese cities.

The Singapore developer will hold a 50 percent stake in the fund named Raffles City China Fund, while financial institutions and pension funds in Asia, Europe and North America will own the remaining stake.

The Raffles City China Fund will initially own the developer's 55.9 percent stake in the Raffles City development in Shanghai and own a 100 percentage stake in the three Raffles City projects that are being developed in Beijing, Chengdu and Hangzhou, CapitaLand said.

The fund, which has an option of closing in December 2008, may grow to as much as US$1.3 billion. CapitaLand may reduce its stake in the fund to 45 percent if investor demand is "strong," CapitaLand said in a statement.