Chinese insurers win approval for SME-focused PE funds

The change may result in RMB2 billion ($322 billion) being invested in SMEs, with an expected first phrase of fundraising worth around RMB500 million, according to a statement released by the China Insurance Regulatory Commission (CIRC).

Insurers can invest either directly or indirectly, but they are expected to provide value-added services in addition to capital.

The move - which aims to provide alternative funding channels for SMEs that often struggle to secure financing from conventional banks - follows a CIRC decision to allow insurers to invest in venture capital funds. Total allocations to VC funds must not exceed 2% of an insurance company's total assets and exposure to a single fund is capped at 20%.

In 2010, the CIRC allowed insurers to start making LP commitments to domestic private equity funds. Last year, the cap on their total exposure to private equity funds and private companies was raised to 10% of total assets, up from 5%. Fast-track approvals have also been introduced for PE fund commitments, with the average waiting time reduced from one year to a few months.

In late 2012, insurers got the green light to invest in offshore PE funds.

Chinese insurers are setting up alternative investment subsidiaries, covering credit assets, trust products as well as traditional private equity funds. However, progress is said to be relatively slow. Industry participants say unfamiliarity with asset allocation strategies and an emphasis on short-term investment returns are holding back the industry.

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• Topics
• Greater China
• Regulation
• Fundraising
• China
• LPs
• Consumer
• SME
• healthcare
• regulation
• CIRC
• Fundraising