The private fund market in China is equivalent to the professional investor market in Hong Kong. Only qualified investors, such as institutional and high net worth investors (HNWIs), are allowed to participate.
On the sell side, players include foreign and domestic mutual fund asset management firms, hedge funds, private equity and venture capital firms.
The private fund market is what foreign asset managers plan to target after obtaining an investment management wholly foreign owned enterprise (IM WFOE) registration and obtaining a private fund licence from the AMAC.
The number of firms offering private funds has increased to 20,652 from 18,048 at the start of the year. The number of funds year-to-date grew by 27%, reaching 60,688 products offered to private investors.
Alts interest
HNWIs in China are expected to allocate more to private equity and venture capital funds, according to a survey report by Noah Holdings, in which 70% of HNWIs said they plan to do so.
The report also noted that HNWIs in China hold around 22% of their assets in alternatives, while ultra HNWIs have around 46% in the asset class.
Although China’s private fund industry continues to grow, it has seen increased regulatory scrutiny.
Last month, China’s State Council released provisional regulations covering various areas that private fund managers should comply with. They include rules for fundraising, the mechanisms required in an investment operation and the duties and responsibilities of fund managers and sales staff.
Last year, up to 10,000 private funds had their licenses revoked as malpractices were revealed throughout the industry. The fund closures were initially prompted by the actions of the AMAC, which demanded firms disclose information on their products and audit reports.
