RMB fund vs. USD fund issue losing importance - AVCJ Forum

Yibing Wu, president of private equity funds management at CITIC Private Equity, observed that the maturing China currency ecosystem is causing the dollar and renminbi worlds to converge in PE terms. This has wide-ranging implications for all investors.

"The question we must ask is how long-term international investors should look at China's capital market," Wu said. "This market is destined to become the largest in the world."

Derek Sulger, a partner at Lunar Capital Management, agreed that the internationalization of China's currency has redefined the fund denomination debate. He noted that US money managers are now setting up dim sum bond exchange-traded funds and foreign real estate investors are raising funds by issuing dim sum bonds.

On renminbi fundraising specifically, Wu said the hype doesn't reflect the reality. He argued that it is harder to raise a local currency vehicle than a US dollar vehicle due to the paucity of domestic LPs and the fact that high net worth individuals don't like to commit their money for long periods.

Another challenge for larger independent funds is attracting the majority of capital from non-government sources. If they fail to do this, the fund is classed as a state-owned enterprise and has to hand over a portion of profit to the National Council for Social Security Fund.

"As a result, there a large number of smaller funds that have strange terms, like no carry, the government owning a large chunk of the GP, or three guys ponying up their own money," Wu said. "They shouldn't even be called private equity funds."

Frank Han, executive director of Bohai Industrial Investment Fund Management, added that there has been a lot of illegal fundraising from retail investors who don't fully understand the asset class. "If this continues the government will step in," Han said.

The Investment Summit formed part of the 24th annual AVCJ Forum, which took place from November 7-10 in Hong Kong. For more information, please visit http://www.avcjforum.com.

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• Topics
• Renminbi fund
• Fundraising
• Greater China
• China
• Fundraising
• AVCJ Private Equity & Venture Forum
• Lunar Capital Management
• Citic Private Equity