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China’s PE Scale Exceeds 10 Trillion Yuan as A First

The Assets Under Management (AUM) of Private Equity (PE) firms and privately offered funds exceeded 10 trillion yuan for the first time, the Asset Management Association of China (AMAC) revealed on September 14th, 2017. 

The Overall Scale of PE          In July, the scale of private equity has already reached 9.95 Trillion Yuan. According to the data of AMAC, the number of PE firms has risen to 20,652, and the number of privately offered funds has increased to 60,688 by the end of August. Also, the real payment of AUM of PE firms and privately offered funds rose to 10.21 Trillion Yuan. According to the report of AMAC, the total number of employees in these private equity firms currently stands at 228,900, and 164,900 people have registered in a professional system. Compared with one month earlier, the AUM of PE firms has increased 2.6%.

Since 2017, the cumulative growth rate of private equity AUM has reached 29.4%. In contrast, the public offering fund was 9.16 Trillion Yuan in December of 2016 and 10.68 Trillion Yuan by the end of July. This with a cumulative increase of 16.6%. Although data for public offering fund in August has not come out yet, the growth of private equity is far stronger than public offering fund. Unless the public offering FOF is impressive enough, the scale of private equity fund will finally exceed the scale of public offering fund, and it will just be the matter of time. 

Geographical Situation         By the end of August 59.73% of the 20,752 PE Firms are based in Shanghai, Shenzhen, and Beijing, with 4,324 companies in Shanghai, 4,092 in Shenzhen, and 3,922 in Beijing. The number of privately offered funds is 17,900, 11,628, and 11,046 respectively. The scale of the PE funds in Beijing is 2.39 Trillion, followed by Shanghai (2.38 Trillion), and Shenzhen (1.57 Trillion) which occupies 62% of the total PE scale of China. Besides these three cities, the number of PE firms in Zhejiang Province (includes Ningbo) has reached 2,082, which is higher than Guangdong Province (except Shenzhen) which has 1,172 PE firms. The AUM of PE firms is 787 Billion Yuan in Zhejiang Province (includes Ningbo), and 385.6 Billion Yuan in Guangdong Province (excepts Shenzhen).

Type of PE Funds

According to the charts provided by AMAC, the securities-class PE fund AUM scale is only 35% of private equity fund scale. PE fund is expanding rapidly with a cumulative growth of 3.75% in August. Securities-class private equity has been squeezed. In August, the number of securities-class PE firms has increased to 7,943, but the overall scale has declined by 4.7%, with a decrease of 110 Billion Yuan. 

The securities-class PE fund has been shrinking this year. By the end of August, securities-class PE scale will have shrunk by about 500 Billion Yuan, while private equity fund scales increased 2 Trillion. On the other hand, there is a trend of month by month decrease of the securities-class PE products. According to the data of AMAC, the number of securities-class PE products has reached a peak of 1,194 in March, but then gradually shrunk. In the past three months, the number of monthly publications of securities-class PE funds has gradually decreased from 985 in June to 891 in July, down to 804 in August. 

China's mass innovation and entrepreneurship programs and policies are the major forces for the robust development of China's private equity funds. The government encourages State-led investments and private investments in startups and is making efforts to pave the way for enterprises to go public. Unicorns in this industry with high returns also attract investors’ eyes. But in fact, it’s hard to find and invest a unicorn company in the industry. IPOs are also not as simple as imagined. The return on Private Equity investment is high, but the investment cycle is long with greater risk. One coin has two sides, the same as securities-class PE funds and private equity investment funds. 

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