China's rainmakers go solo
There have been many articles, books, discussions and conferences on Chinese entrepreneurism. This has come under the spotlight again with the recent wave of IPOs by mainland businesses in various bourses around the world. While many of these activities are followed in the pages of AVCJ, I would like to highlight another trend of entrepreneurialism that is even closer to home – senior private equity professionals going independent. By this, I mean individuals working for existing investment companies and leaving to form their own private equity funds.
While this is obviously not a China-only phenomenon (there are also plenty of examples in India, with Renuka Ramnath and Ajay Relan to name but two), the Chinese exodus has been particularly strong. Perhaps it is a reflection of these individuals' confidence in the potential of the domestic market? Or could it be, as a few LPs suggest, that some professionals are simply fed up with working for an organization that has internal processes unsuited to the Chinese market... oh no, not another late night call to the Park Avenue head office?
Whatever the reason, it is clear that many of the star dealmakers (Wu Shangzhi, Fred Hu, Mary Ma, Weijian Shan, Andy Yan, Gary Rieschel/Duane Kuang, Joe Zhou, Forrest Zhong, and so on) in China have chosen the independent route. They are either raising their own funds or, like Weijian Shan, joining rising Asian-based partnerships. Indeed as China continues to dominate the Asian private equity industry in terms of fundraising and investments, the number of these ventures will only increase. Spurred by interest from local and international LPs, Chinese rainmakers find it all too easy to raise renminbi funds - and, in some cases, US dollar funds as well - in short periods of time.
As we know, one of the main issues impeding Chinese private equity is the scarcity of professionals, especially those senior and experienced enough to assume the responsibilities of a managing partner. Only a few select professionals have been able to pull this off successfully on the international stage. The surge of this "private equity entrepreneurism" may therefore create some problems for global funds looking to increase their focus on China.
There are exceptions: David Liu with KKR, Chang Sun at Warburg Pincus and Sing Wang at TPG. Other funds might find it is worth their while to find out what makes these leading figures stay put.
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