Venture capital and private equity funds find life tough
Venture capital and private equity sectors are finding life tough as investors lose their appetites in a weak economy and IPOs dry up
A slew of new data suggests mainland-focused venture capital and private equity funds may be finding the going tough after a dream run in past years.
The natural life cycle of these funds, from raising cash to investing and eventual exit, is now in jeopardy amid a drought in initial public share offerings because of a weak economy and poor investor confidence.
The dire scenario in the once highly lucrative venture capital and private equity sectors has made fund managers increasingly concerned about their own investments and divestments, sparking worries among investors that they would continue to do poorly this year.
The Beijing-based consultancy Zero2IPO said 369 China-focused funds were launched last year, nearly two-thirds more than in 2011. However, the sum raised amounted to US$25.3 billion, more than a third lower than in 2011.
The number of new venture capital funds last year hit 252, down a third from the previous year, Zero2IPO said. The sum raised by these new funds fell two-thirds to US$9.3 billion.
The IPO market in the United States remains closed for Chinese companies after a string of accounting scandals, while the domestic securities regulator has tightened approval procedures on new flotations in Shanghai and Shenzhen to bolster investor confidence.