Private equity and venture capital (PEVC), hedge funds and secondaries, are all flourishing in China due to favourable reforms and an accommodating economic environment.
According to the Preqin Alternative Assets in Asia-Pacific: Greater China report published by Preqin, the global leader in alternative assets data, tools and insights.
Preqin Alternative Assets in Asia-Pacific findings
China’s PEVC has obtained critical mass, with more than US$1.04tn Assets Under Management (AUM) in 2020, equating to 61% of capital targeting the wider APAC region.
Venture capital remains the dominant strategy in Greater China, accounting for 46% of total PEVC AUM based in the country as of September 2020.
China’s hedge funds monthly cumulative performance has steadily improved, although many hedge funds still struggle to implement sophisticated strategies outside of equity strategies.
Investors surveyed by Preqin reveals that 57% said China presents the best opportunities for hedge funds among emerging markets, the highest percentage of all asset classes.
Whilst the secondary private equity market in China is still niche, secondary transactions have risen in recent years with a record number of funds closed and aggregate capital raised.
Experiences from private investment firms
This includes TR Capital, the Hong Kong-based secondary fund of funds manager, one of thefirst firms to launch a China-focused private equity secondaries fund, back in 2009.
TR Capital has raised a total of $698mn across three funds between 2012 and 2021.
Ee Fai Kam, Head of Research & Data Operations at Preqin said, “China has solidified its presence on the world stage. Our report shows signs of rapid growth of organisations across the board for private investments in Greater China which is fantastic to see.”
“The venture capital market in particular has seen vastly improved prospects. We expect this trend to continue, given that the pandemic has accelerated a number of technological developments, and venture capital-backed companies are typically at the forefront of these.
“Recent regulatory moves have caused a stir in the market, but we believe the long term future of China has not dimmed. It is still the world’s largest market with abundance of talent.”
“Investors are going to be hard pressed to find a viable alternative in the near term.”