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China-Focused Private Equity Fundraising: Growth Fund Prominence – October 2014

by Matthew Morris

  • 24 Oct 2014
  • PE

Economic figures published this week show that China's economy grew at its slowest pace since the global financial crisis, with GDP rising just 7.3% in Q3 compared to the previous year. While China’s economy continues to grow, albeit at a sluggish rate for the world’s second largest economic player, this blog will look at the private equity activity focusing on the country. 

According to Preqin’s Funds in Market online service, there are currently 155 funds raising capital that are looking to invest in China, either specifically or as part of a wider geographic focus. This is a notable decrease when compared to the 184 China-focused funds in market back in October 2013. The 155 vehicles are looking to collect $64.8bn in capital, with 40% ($26.2bn) of this capital being raised by 51 growth funds, as the below graph shows. Buyout and real estate vehicles make up sizeable parts of the targeted capital as expected, but even these combined do not match the figures seen by growth fundraising in China.

So far in 2014 there have been 66 funds with an interest in investing in China to hold a final close, which have accumulated over $34.2bn in capital commitments from LPs. The peak in fundraising for China was seen in 2008, when 114 vehicles raised a grand total of $62.8bn. Fundraising tailed off in 2013 after the post-recession recovery seen in 2012, with 2014 currently behind the $41.1bn accumulated from 99 funds last year. It seems that just as China’s economy is starting to slow, so too is investor appetite to commit capital to the region. 

The largest fund to close this year, with at least a partial focus to invest in China, has been Carlyle Asia Partners IV. This large buyout fund closed on $3.9bn, which will be used to invest in a variety of sectors in Asia, with a particular focus on China. 

However, there are currently two funds in market with a $4bn target: Blackstone Real Estate Partners Asia and Russia-China Investment Fund. If these and other large China-focused funds in market close by year-end, fundraising for China could yet recover to top the $41bn collected in 2013. Despite a shaky overall economic outlook, there are currently enough funds in market to buoy fundraising efforts focusing on China.

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