Slow progress for foreign RMB funds

While a number of international firms have announced joint venture funds with local governments, few have successfully raised significant capital and most are operating at a much slower pace than their local competitors.

The Blackstone Group unveiled the Shanghai Blackstone Equity Investment Partnership as far back as August 2009 with a fundraising target of RMB5 billion ($781 million). The private equity firm announced a first close in April 2011 and, as of last September, was halfway to its target.
Contrast that with the 12 months it took Hony to raise RMB10 billion for its second local currency vehicle.

The Carlyle Group appears to have been marginally quicker. The Carlyle Beijing RMB Fund, which is also seeking RMB5 billion, announced a first close of RMB2.4 billion in July 2010, six months after launch. As of last May, it had attracted total capital of RMB3.2 billion.

Earlier this week, one of the earliest international investors into China, TPG Capital, announced the successful first closing of its two renminbi offerings, which were announced in August 2010. The funds, one established in Shanghai with the other registered in Chongqing, have raised a combined total of approximately RMB4 billion. The final target for each is RMB5 billion. As with the Blackstone and Carlyle efforts, information is thin on the ground, and we don't know how much each vehicle has attracted.

One detail TPG did disclose, however, was that 90% of the commitments had come from private sources, most likely high network individuals and large domestic corporations. Blackstone and Carlyle haven't announced comparative numbers, but the LPs whose identities have been revealed are predominantly state-owned groups with ties to the regions in which the funds are based.

In his statement to the press, Wang Sing, TPG's Greater China co-chairman, said that the proportion of private sector capital is likely to drop to around 50% upon the completion of the fundraising, which suggests that cash-rich government-linked entities from Shanghai and Chongqing have yet to make large commitments. But they will come, and this will ultimately carry TPG over the finish line.

In an ideal world, these kinds of contributions wouldn't be so significant. China's lack of true institutional investors - the National Council for Social Security Fund (NSSF) is the only real LP in the Western sense of the word - continues to be a drag on the industry, and foreign GPs in particular. The combination of Blackstone's track record and well established processes and local government participation might appeal to institutions seeking a higher of degree of certainty in their alternative investments. As it stands, the group that comes closest to fitting the bill - insurance companies - remain on the sidelines.

Everyone knows that it's a case of when, not if, they participate. The regulatory processes to facilitate this are already in motion and there have been reports of financial institutions making selective commitments, although nothing has been officially confirmed or openly publicized.

For the likes of Blackstone, Carlyle and TPG, change can't come quickly enough.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Fundraising
• Renminbi fund
• Greater China
• The Blackstone Group
• TPG Capital
• The Carlyle Group
• China
• Fundraising
• Renminbi