LP In The "UKA Era": Overseas Institutions Actively Allocate Chinese Market

? ? ? ? Last year, with the outbreak of the global epidemic, a fund-raising storm began to sweep the US dollar fund. Under the transmission layer by layer, the funds injected by overseas LP into VC / PE industry were also shrinking rapidly.

Half sea water, half fire. Fund raising differentiation also plays out among dollar funds. At a time when many GP are still thinking about "where to find money", many investment institutions have reported that the US dollar fund has been raised, even over raised.

? ? ? ? From 2020 to now, the entire investment industry has experienced a similar roller coaster market. At the beginning of the outbreak, the PE industry was worried about the performance and the situation of the invested enterprises. But now it looks like 2020 is the best year for the PE industry in the world. Only from the perspective of exit and performance, the development of the whole industry is commendable.

Matthew effect in private equity market

"The domestic market has experienced several years of cold winter of fund-raising. Last year, many funds issued press releases, including U.S. dollar and RMB funds, achieved over raising. If you watch too much news, you will have an illusion. If you don't have over raised funds, you will be embarrassed to say that you are a head organization. " Ai Ai, vice president of step stone group, said frankly that 35% of the funds raised more than $1 billion last year, and only 20% in 2010, which means that the fund-raising of this scale still dominates the market.

From the global point of view, even in the very mature European and American markets, the Matthew effect of private equity market still exists“ From the perspective of market development, this is not a very good trend. In the process of sweeping the sand, there will be some professional and distinctive GP as the target. Let's choose. " She revealed.

For us dollar funds, when the capital injected by overseas LP into VC / PE industry shrinks rapidly, "denominator effect" will approach. The so-called "denominator effect" is caused by the fall in the open market asset value. LP often hold both private equity funds and public shares in their portfolio. If the rest of the portfolio depreciates, in order to maintain the ideal ratio of the portfolio, LP must slow down its investment in private equity. Some investors are forced to take remedial measures, such as freezing new investment commitments to the fund or selling shares in the PE secondary market.

For small and medium-sized funds, if there are no new funds, new projects and new exits, the management fee of about 1.5% will not last long. But for VC / PE firms with plenty of bullets, it's another story. The global outbreak of the epidemic is actually a strong medicine for the long brewing crisis of VC / PE industry.

Ai Ai believes that the exit channel of domestic private investment has not been smooth for a long time, especially compared with us dollar investment“ We see the explosion of the private equity market ten years ago, including the wave of entrepreneurship and innovation in 2015, which accumulated a large number of investment enterprises and formed a barrier lake effect. " She said that the stock of assets in the market is very large, and there are funds in the market. But step stone is optimistic and prudent about whether it has reached the explosive point. The private secondary market needs a very professional team to operate, which is not an opportunity for market leakage. Even if the mature Private Placement Level II has developed for decades, it still faces the problems of information asymmetry, communication and coordination. Ai Ai believes that there are more realistic problems in the domestic RMB fund market. Many domestic LP companies have the background of state-owned assets and the government, so the secondary pricing problem of private placement needs to be solved.

"Top companies are not worried about financing. Four or five funds can raise a large amount of funds, which may be several times over raised. When these overseas funds enter the Chinese market, they will give priority to dabaima and start investing from the head. However, the common problem faced by funds below the neck is that it is particularly difficult to raise funds. If the financing is extended to 18 months or 24 months, it may not be able to achieve the original goal. " She said frankly, this will lead to a gap problem. Even if you are a very good investor of RMB fund, it may not be recognized in the US dollar market and the global market.

LP in the "UKA era"

Like most RMB funds, US dollar funds are also facing the severe test of investment side and exit side. In fact, in the past two years, both A-shares, Hong Kong stocks and even US stocks have been broken and valuations in the primary and secondary markets have been reversed to varying degrees“ Some people wait and see during the winter, while others rush forward in a retrograde way. "This sentence vividly reflects the different living conditions of venture capital circle under the global stock market turmoil.

Every crisis is a knockout. Yao binchao, chairman and managing director of Ardian Greater China region, said that in the past one to two months, we have seen the phenomenon of hanging upside down in the primary market and the secondary market, and the stock prices in the secondary market have fallen to a certain extent, and many leading enterprises have cut back“ In the primary market, people are still pursuing pre IPO and high price entry. Ardian will take a more calm attitude. At the same time, we hope that the quality of the company can be better carried and can withstand the test in the market, especially in the open market. This is where we are now observing carefully. "

For LP, it is now in the "UCA era" (viz. Vuca, which refers to volatility, instability, uncertainty, complexity and fuzziness), and many LP have cash liquidity problems. Yao binchao believes that this is very common in US dollar and RMB funds“ Fund s is the share of GP. In principle, whether the asset package belongs to the category of fund s depends on whether the asset package has a certain proportion of investment, such as 60% and 70%. In this case, it can be called s fund. Many RMB fund managers have a very good interaction with enterprises, and they have the ability to grab very good shares, so investment is not a problem for him. " He mentioned the current situation. Many head RMB funds are trying to put their assets into mini asset packages after the intervention of s fund, and at the same time, they provide some new investment to form a new US dollar fund. This form has been verified, but it takes a long time to raise funds in the international market.

Last year, the government proposed a domestic and international "dual cycle" strategy. From the perspective of external circulation, the challenges in the past two years have been huge, and the original global seamless industrial chain has been broken. Zhang Li, managing director of siguler guff and chief representative of China, said frankly that according to her observation, the whole market has reached a delicate stage“ However, from the perspective of PE fund raising, investment, management and withdrawal, the opportunities of RMB fund are better than before, which is a major advantage. RMB funds have long been laying out industries with great potential and emerging industries in the future. " She disclosed that siguler guff's U.S. dollar funds invested in the past year or two are all RMB GP converted into US dollars, and RMB funds have great advantages in the early investment of subdivided industries.

China is one of the best investment destinations

"If you want to configure growth, China is one of the best destinations." According to Qian Jun, general manager and investment director of Schroder advanq in China, 80% of the growth of emerging markets comes from the Asia Pacific market, and 80% of the growth of the Asia Pacific market comes from China“ In terms of LP's willingness to invest, in the past, many overseas investors regarded Chinese investment as a part of Asian investment. Now communicate with them again, their appeal will be very clear: either invest in a Chinese fund; Or invest in a special account in China. China's differentiation has been very obvious. "

According to statistics, there are nearly 12000 RMB fund managers in CFA, but there are nearly 600 US dollar funds in China, of which nearly 300 are active US dollar funds“ If you are optimistic about the Chinese market, you should not only focus on the 300 US dollar funds, which account for only 2.5% of the Chinese market share. Schroder adveq is optimistic about China's private equity market and naturally is optimistic about China's RMB private equity market. This is a logical inference. "

Qian Jun believes that the Chinese market has also shown very good returns“ From the big data point of view, compared with the top funds in the United States, China's top funds have better growth than American funds, but the disadvantage is that the distribution is relatively weak, which is often criticized. But in the past year or two, the situation has changed a lot. China's funds not only have growth, but also have liquidity, which has played a great role in improving the overall image He said that the performance of well done managers of RMB funds is at least as good as that of US dollar funds; Secondly, the overlapping degree of invested enterprises is very low, which is the reason why Schroder adveq is optimistic about the background of China.

In addition, he stressed that "double circulation" is not absolute in PE industry at least. The investment period of US dollar LP is very long, and US dollar investors are more patient. This is a process that helps to promote under the large "double cycle" system. It is a win-win pattern for the whole Chinese fund industry and investors.

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