Private investments, including 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.
Greater China’s PEVC has obtained critical mass, with more than 1.04tn USD assets under management (AUM) as of September 2020, equating to 61% of capital targeting the wider Asia-Pacific 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.
With regards China’s hedge funds industry, monthly cumulative performance has steadily improved, although many hedge funds still struggle to implement sophisticated strategies outside of equity strategies. That said, according to investors surveyed by Preqin in November 2020, 57% stated that China presents the best opportunities for hedge funds among emerging markets, the highest percentage of all asset classes.
The report also suggests 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. This includes TR Capital, the Hong Kong-based secondary fund of funds manager, one of the first 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 across the board for private investments in 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 rightfully caused a stir in the market, but we believe the long term future of China has not dimmed. It is still the world’s single largest market with abundance of talent; investors are going to be hard pressed to find a viable alternative in the near term.”
For more information and analysis, see the full ‘Preqin Alternative Assets in Asia-Pacific: Greater China’ report here.
Additional key highlights of include:
- Venture capital exits climbed to $81bn in 2020, up from a recent low of $15bn in 2016.
- China’s dependency ratio has been steadily climbing, from 34.2% in 2010 to 41.5% in 2020. Preqin data shows that consumer discretionary deals represented 34% of total deal value in 2020, up from only 17% in 2015.
- Greater China currently consists of 3,952 fund managers and 1,113 investors – both the largest of any Asia-Pacific region.
Preqin is the Home of Alternatives TM, the foremost provider of data, analysis, and insights to the alternatives industry. The company has pioneered rigorous methods of collecting private data for almost 20 years so that 110,000+ global professionals are streamlining how they raise capital, source deals and investments, understand performance, and stay informed. Through close partnerships with its clients, Preqin continuously builds innovative tools and mines new intelligence to enable them to make the best decisions every day. For more information visit www.preqin.com.
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