Report: China LPs provided unprecedented liberties

Chinese insurers are reportedly gaining approval not just to invest in private equity funds, but also to raise them.

China Life has reportedly become the first Chinese insurer to be granted a license to raise a private equity fund, making another regulatory breakthrough for China’s private equity industry.

The Chinese company has formed a team of 20 to 30 people to identify investment opportunities and is close to its first deal, according to Chinese business newspaper 21st Century Business Herald. The target size of the fund and its investment strategy could not be determined at press time.

China Life declined to comment, while the China Insurance Regulatory Commission (CIRC) could not be reached for comment.

Last August, the CIRC introduced a temporary measure allowing China-registered insurance companies to invest no higher than 5 percent of their latest quarter’s total assets either directly or indirectly into domestic private equity. This was a move seen by industry insiders a milestone in the development and institutionalisation of the country’s private equity industry.

For domestic fund managers, the most obvious plus was the creation of another rich vein of capital to potentially tap into on the fundraising trail. With substantial assets under management and long investment horizons, insurance companies were expected as a good addition to China’s limited LP base, which largely consists of high net worth individuals and government-related bodies.

It's unclear, however, how much existing fund managers will benefit should insurers opt instead to anchor and raise third party funds themselves. 

China Life might not be the only insurer to have such aspirations, according to one Hong Kong-based fund of funds manger. He said that most private equity-bound insurance capital thus far has gone towards direct deals. He added, however, that that was still good for the industry, given the insurers' longer term investment horizons.