Measuring Value®: The Changing Private Equity Landscape: What it means for investors
Special issue, September 2009
In this issue, we provide the viewpoint on the changing private equity landscape and the implications for investors. Key points covered about the changing PE landscape and what it means for investors include the following:
- The China private equity landscape is comprised of a complex mix of domestic and foreign players, private and public monies, processes, and projects, and an unfolding transformation of China capital linkages.
- China has put into play many policies and practices to support economic recovery which impact the private equity landscape and is creating both the opportunity and necessity of new forms of cooperation among the many players.
- Amidst the stunning surge of bank lending, several concerns have provoked intense discussions – about the sustainability of such a robust intervention by government; the use to which borrowed funds were put; future non performing loans (NPL) risk; and the concentration of lending into the State-owned sectors.
- High levels of bank lending into the State-owned enterprises, where the actual need for capital is limited, is transforming many SOEs into important financial investors, even into LPs for equity investment funds.
- The policy changes appear to recognize that financial investors need to be integrated into China's capital allocation process, and more professional financial management needs to be brought in quickly.
- Domestic private equity, raising funds in RMB and reinvesting in RMB assets, will continue to expand its role and size in China's economic development. On this path, there will be many challenges and opportunities for foreign and local GPs and domestic LPs.