China Has Become a Strain on Private-Equity Firms
TikTok owner ByteDance, another highly valued private tech company that counts private-equity funds among its shareholders, shelved its IPO plans. In 2022, the average annual return for China private-equity funds, including venture capital funds, was minus 5.6%, according to estimates from data-analytics firm Burgiss. That was the lowest since the global financial crisis in 2008, although it was better than the global average last year.
Some managers of Chinese private-equity funds have stopped traveling to the U.S. to meet with potential investors in the hopes of raising money, because demand has fallen so much, said Marco Klaus, the chief investment officer at Silverhorn Group, an owner-operated investment firm in Hong Kong. U.S.-China tensions have been a major deterrent, he added.
The Biden administration is preparing an executive order to curb venture-capital and private-equity investment in China and other countries, The Wall Street Journal previously reported. U.S. university endowment funds, many of which used to be big backers of China-focused private-equity funds, have been asked by the State Department to disclose and divest Chinese assets.
Initial public offerings, which have been a traditional way for private-equity firms to cash out of their investments, have started to bounce back in the U.S. But IPOs in Hong Kong—the main international listing venue for Chinese companies—raised just $2.2 billion in the first half of 2023, down 16% from last year and well below 2021 volumes, according to Dealogic. Private-equity funds in China have been investing more in industries that are favored by Beijing, including semiconductors and electronic devices, manufacturing, biotech and healthcare, according to BDA Partners,
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