Newly Published Reports

Private Equity in China is a decade old and a couple years short of rapid expansion. As the industry heads for another fundraising peak by 2015, a number of recent regulatory moves are shifting both the parameters and rules of the game. Previously popular VIE structures may soon become cliché as activities move onshore. Institutional investors will demand a seat at the profit table as HNWIs, China’s elusive siren of untapped wealth, begin to eye alternative opportunities. Entering the sector requires a thorough understanding of the market’s unique operating mechanisms.

The last week of January was occupied by Chinese New Year and both investors and managers were highly conservative in their moves. Only a handful of new products came to market, and were met with extremely limited demand. A turnaround in stocks should have provided a modicum of support but most portfolio managers were too slow in their sector shifts to capitalize on the gains, resulting in poor performance among most funds.

A growing queue of QFII licensees are now waiting for their first quota and we expect SAFE to clear the backlog quickly in the early part of 2012, showing support for QFII even as RQFII and RFDI are launched. Those latter programs will likely dominate headlines in the next few months and we anticipate that control over access to them will be even more firmly in the hands of Chinese-owned firms than many in Hong Kong expect.
While access programs continue to develop, there may also be movement from the China’s largest institutional investors.