Year 2010 should be a milestone in the fundraising history of China. The recent launched RMB 9 bln ($1.3 bln) Citic Private Equity Fund, said about 22% of the commitment money come from National Social Security Fund, the country’s national pension fund. Citic PE Fund is also the largest RMB private equity fund debuted ever before with all funding capital from domestic limited partners.
I am here to remind my readers that the biggest USD private equity fund in China is rainmaker Fang Fanglei’s Hopu Investment Management, with $2.5 bln from global investors such as Temasek and Goldman Sachs.
Venture Capital and Private Equity
This morning I heard that the Singapore-based Axiom Asia Private Capital Management had successfully raised a $750 mln fund of fund to help investors to access the Asian private equity market. In the past years, global institutional investors, such as Teacher Retirement System of Texas, California Public Employees’ Retirement System (CalPERS), California State Teachers’ Retirement System and Canada Pension Plan Investment Board, etc, had rushed into the growing market. That made huge opportunities for investment consultants and fund of fund managers to win mandates from above investors. But a more important perspective, is that encourage investment bankers and financiers with Asian experience to found their own firms.
For instance, in China, there are 125 venture capital or private equity funds finishing fundraising with total $12.3 bln in this past year. In those funds, 76% are dominated by RMB, 15% are USD and the rest are joint ventures. Chinese SOEs, high net worth individuals, local government funds of funds, and private investment companies all showed their interests in the emerging market, especially the launch of Chinese Nasdaq, ChiNext. The first round listed companies were prices at average 50x P/E in public initial offerings. Whatever there are or no bubbles, pre-IPO investors enjoy it.
Ø Hedge Fund: As I had written in past posts, Greater China hedge funds are always attractive assets considering their high growth. Even Anthony Bolton, Fidelity’s star fund manager, had made the surprise decision that he would return to the company to run a China fund from Hong Kong. I think UK investors know China better than others because of the former colony as a bridge. Read More on Anthony Bolton: Why I’m returning to running money – in China
Ø Real Estate: Foreign investors may be caution on speculative in Chinese property market and uncertain government policies. But in second-tier cities, property prices are still not high especially considering local economy growth. I do believe the real estate assets in central and west provinces are attractive. Investors need to follow the government policies when they target projects. As the launch of Wuhan-Guangzhou High Railway and Shanghai-Chengdu High Railway, cities such as Hefei, Wuhan, Chongqing and Chengdu could be more important in the map of China economy. I know several real estate funds are planning to raise new money in the next months. Most investors come from Middle East, North America and Europe, etc.
Ø Distressed: Investors may have noticed the boom China credit in 2009 as of RMB 4 trillion stimulus plan. The mainland banks have to face lots of non-performing loans after lending a record RMB 9.6 trillion in last year and then being ordered to limit lending by the central government. Just like what the Japanese government had done in 1990s, a plenty of distressed assets will be exposed to foreign investors. I am strongly suggesting you to watch the movie Hagetaka, where Chinese investors become “vulture” in Japan’s distressed market.
Disclosure: No positions