Wealthy individuals and family offices account for almost half the number of Chinese private-equity limited partners, but only a fifth of the actual funds invested, according to Beijing-based consultancy Zero2IPO.

And the number of private-wealth investors in the country’s PE market is rising swiftly despite their lack of expertise in the asset class, says a report published this week by the firm.

A total of 3,947 limited partners have committed $652 billion to China’s booming PE industry as of June 30. Of those LPs, 1,895 (48%) are high-net-worth individuals (HNWIs) and family offices, says Zero2IPO.

But almost 80% of the total funds invested were controlled by fewer than 300 institutional investors, including 97 listed companies, 95 public pension funds, 16 sovereign wealth funds, 78 FoFs and three enterprise annuity trusts.

Most of the institutional LPs are based offshore. “Compared to overseas LPs with many years of investment experience, local institutional investors are still far behind in terms of the amount of committed capital,” says Amanda Liu, a Zero2IPO analyst.  

The large number of domestic HNWI, family-office and local-enterprise LPs makes for a relatively fragmented client base, due to the limited amounts of capital they commit. The average amount invested per local LP is $121 million, compared to the average $1.4 billion per LP that invests in dollars, says the report.  

As of June 30, there were 794 dollar-based LPs with $349 billion invested, equivalent to 54% of the total; 3,039 renminbi-based LPs, accounting for $261 billion (40%) of the total; and 46 euro-based LPs, accounting for $39 billion (6%).

European LPs, on average, contribute the most capital to PE investments, since many of them are large public pension funds, funds of funds (FoFs) and policy banks, according to the report.

Zero2IPO says wealth accumulation and investment needs are the main drivers of the growing number of HNWIs and family offices moving into alternative investments.

Moreover, intermediaries – such as independent financial advisers and private banks – are playing a more active role in facilitating PE investments for their clients. For instance, Shanghai-based Noah Private Wealth Management has a dedicated PE research and sales effort, and it launched a PE FoF last year, named Gefei.

And, in the past two years, China Minsheng Bank has cooperated with several well-known PE funds – such as DT Capital Partners, SAIF Partners and Shenzhen Leaguer Venture Capital – to launch PE investment products targeting its private-banking clients.