Tao Xiang International Finance Lectures (No. 10): The Past and Present of Domestic and Foreign PE

On December 9, Tao Xiang International Finance Lectures (No. 10) was held in Renmin University of China. Dr. Geng Qun, Research Chief of Chengtong Fund, gave a lecture on “the past and present of domestic and foreign private equity (PE).” The lecture was presided over by Hu Bo, IMI researcher and associate professor of the School of Finance of RUC. Postgraduates of the School of Finance, students of Gintong Global Talents Program, and guests from academia and industries attended the lecture. Dr. Geng first introduced the definition and characteristics of PE, the main players and the development history of China’s and the US’ PE markets. He pointed out that the development of PE in the US has entered maturity with stable quantity of funds. With respect to managers, the number of PE managers is second only to that of hedge funds. As for PE’s types, by the end of the fourth quarter of 2016, PE has the biggest number followed by hedge funds. On fund-raising proportion, PE accounted for 5.1% of the total, far below the shares of asset securitization funds, qualified hedge funds and hedge funds. In China, by the end of 2016, PE’s subscription exceeded 10 trillion, surpassing that of the public offering for the first time and making itself a considerable player in the asset management industry. Growth funds remain the major player in raising fund and growth capital still serves as the main investment strategy, and passion for its directional add-issuance cools down a little bit. Then, Dr. Geng shared her analysis on the exit strategy and yields of PE. The total number of world venture capital’s withdrawal in 2016 continued to decline slowly just like last year. In exit strategy, equity transfer remains the major means for global venture capital exit, other means include IPO & follow-up exit (including PIPE), GP repurchase and liquidation. In China, in recent years, domestic PE’s overall return has declined due to lack of assets and high-quality standard. On exit return, it is IPO>mergers and acquisitions> equity transfer; exit return of shareholders repurchase and management buyout remains the lowest. In the end, Dr. Geng gave an introduction on the world's top two PE - Softbank Vision Fund and China State Owned Enterprise Structure Adjustment Fund. In the Q&A session, Dr. Geng exchanged her views with the guests on cooperation between sovereign fund and foreign fund, the timing of SOE’s mergers and acquisitions, difficulties that PE’s exit face and the respective countermeasures, the outbound issues of PE and state-backed PE’s impact on companies.

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