By Simon Rabinovitch in Beijing
Financier Fang Fenglei is betting on private equity recovery
Chinaâ€™s unruly markets have vanquished many a savvy investor, but if one man knows how to play them it is Fang Fenglei.
From the establishment of the countryâ€™s first investment bank in 1995 to the complex partnership that brought Goldman Sachs into China in 2004 and the launch from scratch of a $2.5bn private equity fund in 2007, Mr Fang has been at the nexus of some of theÂ biggest Chinese dealsÂ of the past two decades.
Even his abrupt decision in 2010 to startÂ winding down Hopu, his private equity fund, was impeccably well timed. Since he left the scene, the Chinese stock market has been among the worst performers in the world and the private equity industry, once booming alongside the countryâ€™s turbocharged economy, has gone cold.
So the news that Mr Fang, the son of a peasant farmer, will return with aÂ new $2bn-$2.5bn investment fundÂ is more than a passing curiosity. The financier is betting that Chinaâ€™s beleaguered private equity industry will recover â€“ a wager that at the moment has long odds.
The most immediate obstacle for the private equity industry inÂ ChinaÂ is a bottleneck on exits from investments. Regulators have halted approvals for all initial public offerings since October, a tried and tested method for putting a floor under the stock market by limiting the availability of shares. But a side effect has been eliminating the preferred exit route of private equity companies.
Even before the IPO freeze, the backlog was already building up. China First Capital, an advisory firm, estimates that there are more than 7,500 unexited private equity investments in China from deals done since 2000. Valuations may have appreciated greatly but private equity groups are struggling to sell their assets.