* Aims to raise less from state investors due to tax benefits
By Stephen Aldred and Samuel Shen
TPG Capital LP said on Monday it has raised about 4 billion yuan ($635 million) in two local-currency funds in China from mainly private investors, placing the U.S. firm ahead of some of its global rivals in China's nascent private equity industry.
The first closing was announced, however, 17 months after the two funds were launched, and represents 40 percent of TPG's fundraising target, underlining the tight climate for fundraising in China.
Global buyout firms Blackstone Group LP, Carlyle Group as well as investment banks such as Goldman Sachs Group Inc and Morgan Stanley, have all launched yuan funds since 2009, hoping the funds will allow them to invest more quickly in a highly competitive market for deals.
But fundraising has become increasingly difficult due to competition, a limited investor base and a tough economic environment.
"The global economic uncertainty, the domestic monetary tightening and the government's real estate curbs have all impacted investor confidence and their willingness to invest," TPG Partner and Greater China Co-Chairman Sing Wang told reporters in Shanghai.
Global funds have also found it tougher to raise capital than local funds, partly because they are using Western models with longer investment periods than their domestic peers.
Investors in international funds commit an agreed amount to the fund for up to 10 years, and the money can be called for investment at any time during the investment period. China's homegrown funds often have lifespans as short as five years.
Blackstone, the first foreign private equity firm to launch a local-currency fund for China, had raised just over half of its target of 5 billion yuan late last year, while Carlyle had raised 3.2 billion of its 5 billion yuan target by mid last year.
"The market is no longer abuzz with enthusiasm, but in terms of investment, it could be good timing," Wang said.
SHRINKING INVESTOR BASE
According to fund consultancy ChinaVenture, 1,084 yuan-denominated private equity and venture capital funds were launched in China over the past three years, but the country's investor base has been shrinking over the past six months.
Local governments, which typically provide seed capital for new funds, are struggling to manage more than 10 trillion yuan ($1.57 trillion) worth of debt accumulated in the last few years.
Investors are also becoming cautious toward private equity investments as the stock market weakness makes exits difficult and greatly lowers expected returns on such investments.
U.S. firm TPG is alone in raising two funds, both for 5 billion yuan, in Shanghai and western Chongqing.
"TPG is one of those global PE firms that have the longest-term commitment to the China market, and has been aggressively expanding its local teams," said Yuan Mingliang, head of clients coverage at law firm King & Wood in Shanghai. "Its proven investment track records in Greater China has greatly helped its local fundraising," he added.
TPG has been in China for 18 years, and has invested in companies including China International Capital Corp, auto dealer China Grand Auto and Shenzhen Development Bank .
The bulk of the money TPG has raised is commitments from private investors rather than government-linked entities, a strategy the firm believes will make the rest of its fundraising easier, and which is in line with Beijing's policy of encouraging private capital investment.
"I'm particularly pleased that 90 percent of the funds raised have come from private capital," TPG's Wang said, adding that TPG aimed to raise more than half of the target from such investors, including high net-worth individuals and private entrepreneurs.
Such a structure would boost returns on TPG's China funds through their tax treatment, and when they exit portfolio companies through initial public offerings, Wang said.
According to industry insiders, private equity funds with more than 50 percent of committed capital from state-owned enterprises face potential risks of having to transfer 10 percent of their holdings in a company to the national pension fund after that company conducts an IPO.
In terms of investment, TPG will focus on sectors such as consumer and pharmaceuticals, and will also seek to participate in restructuring of state-owned enterprises.
Wang said TPG would seek to raise money from institutions including insurers, China's national pension funds and even the sovereign wealth fund.
"We hope the structure of our funds will meet their criteria and win their recognition," Wang said
RESILIENT MEDIA ENTERTAINMENT#PRIVATEEQUITY #VENTURECAPITAL, #HEDGEFUNDS, #INVESTMENTBANKING & a few fun things as well.
Check US OUT:
http://on.fb.me/vch6FQ
http://linkd.in/oiB29l
http://on.fb.me/sdaWqc
http://bit.ly/uhH9hQ
http://bit.ly/trKLuj
#PrivateEquity, #HedgeFunds, #VentureCapital, #InvestmentBanking, #CapitalMarkets, #MergersAndAcquisitions, #WallStreet, #IPO #ResilientMediaEntertainment, #IPO, @Resilient_Ent, #Film, #Music, #VideoGaming, #Media, #Fashion, #TV, #Technology
No comments:
Post a Comment
WHAT SAY YOU?