Q3'09 Sees PE Fundraising and Investment Steadily Rebounding

28-Oct-2009, Zero to IPO

The research results from Zero2IPO Research Center show that the total amount of newly raised PE funds targeting at Asian market (Including Chinese mainland) in Q3'09 continuously rose. In Q3'09, there were six PE funds available for investment in Chinese mainland fulfilling their fundraising for US$2.47B, drastically down by 86.8% year-on-year. In this case, although the gross amount of newly raised funds slightly increased quarter on quarter, the funds still faced the difficulties in fundraising. This also clearly mirrored the changes in PE upstream supply chain, for example the transformation of the attitude of investors from the imprudence in the past into the caution for the time being.

The reasons behind the phenomenon are as follows: first, the booming PE market with a lot of successful stories in the past two years sounded a magnet for investors, while GP-invested enterprises showed vulnerability to different extent after the outbreak of financial crisis. Second, the funds raised in 2008 failed to fully make investment, due to industry recession and GP investment slowdown. Generally speaking, a fund is expected to start the second round only when investing 80.0% of the total fundraising.

In Q3'09, five growth funds completed fundraising for US$270.86M, accounting for 83.3% and 11.0% of the total in terms of the number and amount of funds. The number of growth funds in Q3'09 increased one compared with that in Q2'09, while the amount raised drastically dropped 84.5%. There was another buyout fund worth US$2.20B completed in the quarter, constituting 89.0% of the total fundraising amount in Q3'09.

In terms of currency, all of the six PE funds targeting at Asian market (Including Chinese mainland) in Q3'09 were RMB funds for the first time, which further supports the research results of Zero2IPO Research Center on the development trend of RMB PE funds in recent years. That is, along with the funding injecting into Chinese multi-layer capital market, RMB funds on Chinese PE market are doomed to be more developed and finally take the lead. After the social security fund said to enlarge its investment in PE funds and China Securities Regulatory Commission lowered the access threshold for stockbroker direct investment in Q2'09, local governments, headed by Shanghai and Beijing Municipal Government, constantly staged new policies and gradually removed the policy barriers in the foundation of RMB funds in China. This in turn incurred another round of upsurge in the fundraising of RMB funds.

Moreover, there was no USD funds raised in Q3'09, because more and more GPs delayed fundraising and more funds were discarded amid the persistent depression of global economy. According to the statistics from Preqin, a world-famous research institution, Q3'09 saw a sharp drop of 55.0% in the aggregate fundraising amount of PE funds worldwide compared with that in the preceding quarter, staying at the lowest level since 2003. Certainly, to reduce alternative investment is only an expedient for institutional investors, and Q4'09 and 2010 will see a rebound in this respect. In fact, there were still a number of large-scale USD funds set up and starting fundraising, such as CDH China Growth Fund.