Investors beware

The bustling Chinese private equity markets can bring great returns, yet, Leo Long writes, investors should be wary to avoid getting entangled in the legal and regulatory web when seeking out these alluring opportunities.

Private equity (PE) had a capital year in 2014. According to a February report from PricewaterhouseCoopers (PwC), Private Equity / Venture Capital 2014 Review and 2015 Outlook, investments by PEs had record volumes and values (up 51% and 101%, respectively).

Venture capital (VC) deal volumes also saw an increase of 81%, the highest recorded since 2008.

Data from the Asset Management Association of China (AMAC) show that the number of PE fund managers nationwide surpassed 12,000 from 7 February last year, when PE fund registration formally commenced, to the end of May this year. As of 31 March this year, the amount of capital managed by PE fund administration organs had reached RMB 2.79 billion (US$450 billion).

Industry experts have noted that segmentation in the industries in which PE funds raise and invest is becoming increasingly prominent, and sources of capital are becoming more diversified, ensuring that funding will be a new force for active participation in raising PE funds in the near future. Additionally, the market is seeing considerable innovations such as contractual funds.