China's opportunity for RMB fund of funds
There is an opportunity for RMB-focused fund of funds in China says a panel of GPs and LPs at the AVCJ Private Equity & Venture Forum China. According to Judy Ye, Director and Head of EMAlternatives Asia says that the composition of RMB capital in China is evolving from the current situation where state-owned institutions provide the majority of the capital. “Private money from high network individuals are up and coming,” she said.
"Some investors think that investing in private equity is easy, but over time they will understand that it is a business best left for professionals and become more hands off," said Morgan Stanley's Gong Jie. As a result, there will be opportunities for fund of funds to help invest that capital.
Vincent Huang, Partner of Pantheon added that, except for two players, fund of funds in the RMB space is not of institutional grade and hence there is an opportunity for teams providing high quality services in the sector.
Regarding the longtime issue of conflicts of interest that GPs that manage RMB and USD funds have, Morgan Stanley's Gong Jie said that the emergence of RMB funds is so common that no LP is questioning why GPs are raising one. However, the intrinsic problem of conflicts of interest between USD and RMB remain. She suggests that investors need to look at the a number of issues, including previous track records and structure their investments.
EM Alternative's Ye agrees. "At the end of the day, it is two things - pick the right people and set the right terms." Ye argues that a good manager will deliver the right returns but it will be very difficult to impose certain terms (e.g. both funds invest at the same pace).
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