China Kicks U.S. Private Equity Aside as Local Funds Rise
By Cathy Chan - May 15, 2012
Blackstone Group LP (BX) and TPG Capital are among global firms being kicked aside as preferred investors in China, the world’s second-biggest private-equity market.
Investments by Chinese firms rose to $7.8 billion last year, exceeding for the first time the $7.4 billion poured in by U.S. and other foreign funds, according to the Asian Venture Capital Journal, which tracks the industry.
The shift to investors using Chinese currency has hastened a 45 percent drop in investments by foreign funds last year, even as the value of private-equity deals has doubled since 2009. It coincides with China’s stepped-up efforts to develop home-grown firms, such as Beijing-based Hony Capital Ltd., and as individuals and institutions pump money into a market that favors the yuan, also known as renminbi, over the dollar.
“Renminbi fund managers have a huge advantage in terms of speed of execution as well as easier exit opportunities within China,” said Chris Meads, Hong Kong-based global head of investment at Pantheon, a London private-equity company that has invested $2.7 billion in Asia. “Deal flow is being diverted to renminbi funds because it’s just easier for them to transact.”
Yuan private-equity funds have raised $41 billion in the past two years, more than double the U.S. dollar amount in China, according to the data from the venture-capital journal. At the same time, foreign-currency funds focusing on China slumped to $10.2 billion last year from $39.2 billion in 2007, according to an April report by consulting firm Bain & Co.
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