A drop in fundraising by private equity firms in China last year impacted US dollar funds more, according to figures from Private Equity International’s data service. A total of $5.8 billion was raised in US dollars for China during 2012, a 58 percent decrease on the $13.8 billion raised in the currency during 2011.
Figures also showed that during 2012, more capital was raised for China in RMB than US dollars – a direct contrast to the preceding year. RMB 39.4 billion (€4.8 billion; $6.3 billion) was raised in 2012, though this was a 50 percent drop from the RMB 79 billion raised in 2011.
The figures show that despite both currencies experiencing significantly lower year-on-year fundraising totals during 2012, RMB-denominated vehicles have fared better during the decline.
“This makes sense because RMB LPs that are investing into institutional quality RMB funds are a sort of captive audience – they can’t go anywhere else,” Conrad Yan, partner and head of Asia at placement agent Campbell Lutyens, told PEI. “For example, the Social Security Fund in Beijing is still only investing into RMB funds so they continue to invest into China with [these] funds.”
The shift toward more RMB funds is “very encouraging”, signifying a maturation of the private equity industry in China, according to Yan.
“The secular development of the Chinese private equity market has got to a point where the RMB segment is playing a bigger role than the USD segment. It is good for the industry because it shows that [it] is taking roots. Historically, private equity in China was a matter of people making an allocation out of a global fund or pan-Asia fund,” he continued.
“Now we have reached the next stage when China doesn’t really rely on allocation decisions. The domestic market has developed so much that it actually has capital funding its own economic growth. This is the first time it has become clear in the private equity sector.”
The largest RMB fund raised during 2012 was CITIC Private Equity’s Fund III, which raised RMB 10 billion, according to PEI’s data division. The biggest US dollar China-dedicated fund last year was FountainVest Partners’ $1.35 billion vehicle, which closed in November on its hard cap.