Record number of private equity funds liquidated in China

A record number of private equity funds on the mainland have closed in the wake of a stock market rout and Beijing's clampdown on short selling, one of their key trading strategies.

Some 148 private equity funds have been liquidated since the stock market turmoil started in mid June, with nearly half of them cancelled before their original settlement dates, showed data released yesterday by Simuwang, a Shenzhen-based private equity information portal.

The asset value involved was not immediately available.

As a result, the number of private equity funds that closed this year hit a record 799, accounting for nearly a third of funds launched in 2015.

Liquidation, also known as a "full closure", involves the sale of all of a fund's assets and distribution of the proceeds to shareholders. It often occurs after a fund has shrunk more than 10 per cent in value, forcing investors to sell at a loss.

"A number of private equity funds, especially those hedge funds, were forced out as they were no longer able to take profits from short selling after Beijing's sweeping crackdown," said Zhang Gang, an analyst with Central China Securities.