Beijing creates PE secondaries exchange

The Beijing Financial Assets Exchange (BFAE) is behind the initiative and will serve as the forum for trading. The alliance itself is expected to be made up of a group of venture capital and private equity firms, commercial banks, securities companies and financial services institutions.

"In China, about 70% of exits are made through an IPO, while the percentage in developed economies such as the United States is only about 20%," said Bo Yu, president of the alliance and vice president of BFEA, China Daily reported. " So we have to try other new exit channels for the healthy development of the Chinese VC and PE market."

He hopes that the alliance can reach 2,000 member organizations and complete 1,000 secondary deals worth a collective RMB30 billion ($4.7 billion) by the end of 2015.

There is undoubtedly sufficient demand and supply for a secondaries market in China. According to AVCJ Research, private equity and venture capital investors deployed more than $52 billion in the country in 2010 and 2011, marginally short of the total for the previous four years combined.

Private equity exits, and IPOs in particular, have struggled region-wide in recent months. A total of 30 public offerings generated $7.4 billion in the first quarter of 2012, compared to $44.2 billion from 127 offerings in the fourth quarter of 2010. China accounts for the bulk of IPO activity in Asia.

Renminbi-denominated fundraising, meanwhile, which attracted more than $24 billion in 2011, has also eased off. There is plenty of anecdotal evidence of high net worth individuals - who comprise the LP base in most of the smaller renminbi funds - defaulting on their commitments to managers because they have become disillusioned with the asset class. They are, potentially, an attractive target for secondary investors.

Foreign secondary specialists tell AVCJ that they are looking for ways to participate in the renminbi space, but structural challenges are significant.

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• Topics
• Secondaries
• Secondaries
• Greater China
• Renminbi fund
• China
• Renminbi
• Secondaries