Hong Kong partner Lorna Chen, leader of the firm’s asset management and funds practice in Asia, was interviewed by Asian Venture Capital Journal about the difficulty Chinese RMB fund managers face in procuring international institutional investors when launching US dollar vehicles. According to Chen, “LPs in the international market don't necessarily understand their business model and are willing to commit. I have seen very few RMB fund managers going to the US dollar market and successfully raising funds."
One issue has been the lack of a compelling investment motive that appeals to target investors. "For example, having a very good track record in the pre-IPO market is not necessarily attractive to international LPs because it is considered high risk and speculative,” Chen commented. “They want to see if the management team is able to turn around a company and add value."
Insurance companies are now able to participate in offshore private equity funds and certain direct investments, and restrictions on pension plans may soon be relaxed. There are also many investment opportunities for state-owned enterprises and private companies, says Chen. “[S]tate-owned enterprises and private companies…are the real potential LPs I have seen over the last 12-18 months, who are very active in the US dollar funds we are working on."
See the video interview here.