VIDEO: Shearman & Sterling's Lorna Chen

"LPs in the international market don't necessarily understand their business model and are willing to commit," Chen said. "I have seen very few RMB fund managers going to the US dollar market and successfully raising funds."

A key element when addressing international institutional investors is effective communication. GPs need to hire placement agents and other service providers with sufficient experience to guide them through the fundraising process and help target LPs that most likely to be receptive. However, these efforts will be fruitless without a compelling investment thesis.

"For example, having a very good track record in the pre-IPO market is not necessarily attractive to international LPs because it is considered high risk and speculative. They want to see if the management team is able to turnaround a company and add value," Chen said.

Just as Chinese managers are reaching out into the international markets, so are their LP brethren - albeit with a view to backing overseas GPs. This territory was once solely the preserve of China Investment Corporation and the State Administration of Foreign Exchange, but now three groups can make outbound commitments or are expected to soon have the ability to do so.

Insurance companies won approval to participate in offshore private equity funds and certain direct investments two years ago, while the government is considering a similar relaxation of restrictions on pension plans. Given the nature of these LPs, Chen expects them to be conservative in their approach and take time in building up international exposure.

"The third category is the state-owned enterprises (SOEs) and private companies - these are the real potential LPs I have seen over the last 12-18 months, who are very active in the US dollar funds we are working on," Chen said.

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