25 September 2018

Massive PE fund outflows seen in 2014, industry experts say

Private equity firms will continue to experience fund outflows as China’s initial public offering (IPO) pipeline remains closed, industry experts said Wednesday.

Traded sales are another way to exit the market, they said.

“There will be massive selling by renminbi funds next year because the IPO market remains suspended,” Yap Kian Woon, a partner at CMIA Capital Partners Pte Ltd., told the 26th annual AVCJ Asian private equity and venture forum.

“Even if the IPO market were to relaunch next year, it will take time to clear the pipeline,” he said.

On Sept. 27, the China Securities Regulatory Commission said the market will remain suspended until IPO reform is officially launched.

Public listings in the mainland have been frozen since October last year due to market volatility, concerns about the financial reporting of companies and poor performance of several newly listed stocks.

“IPO is the first priority when we are in a majority stake,” Gao Zhen, managing partner of Mandarin Capital Partners, said. “If not, traded sales is possible. Sometimes, we will merge the investment into listed companies that have cash to make acquisitions.”

Yap said private equity firms experience challenges two ways. One concerns the capability and social skills to manage bigger stakes. The other is a lack of managerial talent to run the company. 

– Contact HKEJ at [email protected]



EJI Weekly Newsletter

Please click here to unsubscribe