New Chinese LP association to launch fund of funds

The fund of funds is being launched to create an enviroment conducive for institutional investor participation in private equity and to provide investors with access.

IManagers Group, a Beijing investment advisory and fund management firm, is launching a 2 billion yuan ($291 million; €186 million) fund of funds to invest in Chinese private equity funds.

IManagers is an affiliate of China Limited Partners Association (CLPA), which was established earlier this year with the aim of increasing awareness about private equity among existing and potential limited partners.

It has among its members 30 institutional investors from both China and overseas as of now and the numbers are expected to increase. Gary Xu, secretary-general and head of the association, told PEO that the members include trusts, banks and government-linked agencies.

He said that the fund would differ from other fund of funds as its primary objective is to increase awareness about private equity and provide potential investors access to the asset class. There are few limited partners in China at the moment and CLPA’s fund of funds would essentially help bring greater professionalism to new or would-be limited partners to the asset class.

He added that the fund would invest in small private equity funds sized between $15 million and $45 million since these funds face problems in attracting commitments from investors, unlike funds managed by larger firms such as CDH Investments and Hony Capital for instance.

Similarly, he said, there are very few angel networks in China and as such, it is a weak ecosystem on the whole for limited partners to invest in.

The launch of the fund of funds is thus an attempt to foster the interest of institutional investors and to enable them to invest in private equity, he said.

Capital for the fund will be raised in three tranches, each targeting different economic belts in China. Xu said that each of the three portions of the fund of funds will invest with about 10-15 fund managers.