Is winter over for Chinese PE and VC fund-raising?

Fundraising for private equity and venture capital had been on a downward path since November, but began to improve in July. Are asset owners becoming more supportive?
Is winter over for Chinese PE and VC fund-raising?

Fundraising has become easier for Chinese private equity and venture capital funds that have struggled since the end of last year.

Beijing-based private equity firm Xianghe Capital on Wednesday closed its second US-dollar denominated fund at $425 million and its first renminbi-denominated fund at Rmb1 billion ($139 million).

Xianghe said that investors in the US dollar fund include a variety of institutional investors: university foundations, pension funds, as well as a charitable fund. The investors' geographies are divergent too, with participants hailing from North America, Europe, the Middle East and Australia.

The fund intends to take these proceeds and invest them in internet-related businesses, artificial intelligence, and big data projects.

It appears as though the most difficult time for PEs and VCs in China has passed. According to data issued by the Asset Management Association of China, total assets under management (AUM) rose 1.02% month-on-month in July.

That is the first time that AUM have risen since April. The number of funds has also increased to 1,012 in July, up 1.03% on the previous month. Funds for private equity investment posted the biggest jump in July. Assets under management for them increased 1.3% month-on-month to Rmb110 billion in July, twice as much as for VC funds.


About 17 private equity and venture capital firms have raised funds since July, both US dollar ones and renminbi funds. Some of them easily surpassed the amount of the top 10 fundraisings in the first half of the year.

Centrium Capital, for example, in July raised more than $2 billion for its first US dollar fund - almost as much as the third-largest fundraising in the first half of the year. CITIC Capital and Joy Capital also completed their fundraising in August, raising $2.8 billion and $700 million respectively. 

Fundraising was not easy in the first half of the year. Total funds raised decreased 30% year-on-year to $54.4 billion, while the number of funds raising money almost halved, according to the interim report issued by data firm CVSource. But the situation appears to have improved since July.

Funds backed by state-owned enterprises are also feeling the change. After a long hiatus in fundraising and investment for the first half of this year, China Everbright Limited (CEL) said last week that it had started to prepare its global M&A fund and had just closed a $450 million US dollar fund for global infrastructure investment. South Korea's ABL Life Insurance is one of the investors in the global infrastructure fund.

Following long-standing pessimism about China's capital markets, executives CEL said they see signs of encouragement for the future. 

“Investment is, of course, more difficult given the market volatility and trade war,” CEL's chief strategic officer Su Xiaopeng said. “But the trade war also cause procurement costs to decline. We  see some opportunities to invest in high-quality growth for the future.”

Speaking at the release of CEL's interim figures, new chief executive Zhao Wei echoed this more positive mindset, and claimed the private equity company has new limited partners in mind.

"We are cooperating with local governments for domestic fundraising, and targeting insurance funds, social security and sovereignty funds for overseas fundraising," he said. 

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