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LPs Increase to 7,867 in Q1'13, Institutional LPs Act as Saviors

By Charlie Yan , Zero2IPO Research Center
Updated: 2013-04-10 15:38:13

LPs in China’s PE market continues to grow in number, capital available for investments in China edged up from Q1’13. According to Zero2IPO Research Center, a famous VC & PE research institute in Greater China, as at Q1’13, the number o f LPs in China’s VC/PE market has climbed to 7,867, among which wealthy families and individual saw a remarkable rise. In terms of capital available for investments in China, 6,477 LPs in total have disclosed their investments, which amounted to US$ 811.41B.

LP Struggles for Continuously Squeezed VC/PE Financing Channels, IPO Exit Prohibition and Persistently Weak Overall Economic Climate

GP financing channels of VC/PEs have been gradually squeezed. As the CSRC suspended PE funds of partnership share sold by brokers as of November 2012, the CSRC required in January 2013 banks to stop PE products sale, blocking individual LPs’ entry into the market again. Zero2IPO Research Center reported zero IPO exit in Q1’13 PE market, showing repeated contraction of capital exit channels. Most LPs were in the mire for the difficulties in exits for expected investment gains, which made most GP institutions relying on LP reinvestments slow their steps. Shifted to overall economic background, macro economy is still weak though the appearance of recovery signals in Q1, especially capital market. Generally, market has struggled amid adjustment, and most LPs had to face a prolonged fund liquidation period and held a wait-and-see attitude. Affected by multiple factors, LPs tended to be more prudent.

Private LPs Dominate in Number; Institutional LPs Are Superior in Capital Available for Investments

Zero2IPO Research Center has collected in total 7,867 LPs by the end of Q1’13, 6,477 of which have disclosed their capital available for investments in China. Among the 19 LP types recorded by Zero2IPO Research Center, wealthy families and individuals, enterprises, and VC/PE firms ranked the top three with 4,012, 1, 341 and 491 in number, accounting for 51.0%, 17.0%, and 6.2% of the total respectively. Private LPs represented by wealthy families and individuals took up more than half of the total LPs, continuing to lift in latest two years.

By the end of Q1’13, LP capital disclosed that is available for investments has totaled US$811.41B, showing the depression of capital market again. Capital available for investments disclosed by listed companies, public pension funds and sovereign wealth funds continued robust growth (almost 70.0% of the total capital) with US$213.61B, US$166.76B and US$154.24B respectively, taking up 26.3%, 20.6%, and 19.0% of the total capital.

Figure 1 Comparison of LPs in China’s VC/PE Market in Q1’13 by LP Type (By No. of LPs)

Figure 2 Comparison of LPs in China’s VC/PE Market in Q1’13 by LP Type (By Investible Amt., US$B)

Institutional LPs Proactively Seek a Way out in Harsh Investment Environment.

In terms of LP type, Zero2IPO Research Center recorded 6,680 local LPs, 57 joint-venture LPs and 1,130 foreign-owned LPs by the end of Q1’13, respectively accounting for 84.9%, 14.4%, and 0.7%. In terms of capital available for investments, local LPs contributed US$169.00B, while foreign-owned LPs reached US$638.36B. Foreign-owned LPs with only 14.4% of the total LPs in number possessed 78.7% capital available for investments in the market, which is also a remarkable difference recognized among foreign-owned and local LPs for long. As most foreign-owned LPs are institutional investors with long history, they are notably advantageous either in scale or in investment experience.

As observed by Zero2IPO Research Center, institutional LPs have frequently acted under pressure in recent years, actively playing a market savior role. Domestic and overseas institutional LPs evidently prevailed over individual investors in both fundraising scale and capital available for investments. Seeing from domestic situation, institutional LPs such as public pension funds, insurance companies and enterprise annual pensions, especially listed companies, inspired by the policy and investors, bucked the trend to be the main local capital available for investments upon bank financing contraction due to policy reasons. In the mean time, foreign-owned LPs continued to dominate the market via their superiority.

Figure 3 Comparison of LPs in China’s VC/PE Market in Q1’13 by Institution Type (By No. of LPs)

Figure 4 Comparison of LPs in China’s VC/PE Market in Q1’13 by Institution Type (By Investible Amt., US$B)


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