According to Bloomberg, China-focused private equity firms struggle to raise new capital due to rising distrust among U.S. pension funds and endowments from other nations about their economy’s growing political and market risks.

Bloomberg cited people familiar with the matter that Harvard University’s endowment was considering cutting back on its investments in China. In the past 12 months, the pension fund for Pennsylvania state employees didn’t make any new investments in Chinese private equity funds.

According to Institutional Investor, in addition to Harvard, the Florida State Board of Administration has halted funding for new investment plans in China beginning March 1, 2022. Lamar Taylor, Interim Chief Investment Officer, said that the retirement system for Chinese investment remained low at 2.8%.

According to Bloomberg, U.S. dollar-denominated funds investing in China only raised 1.4 billion dollars in the first quarter of 2022, three consecutive quarters of decline since 2018.

CNBC cited the Emerging Markets Private Equity Association that private equity investment in China fell to 9.8 billion dollars in the first half of 2019, compared with 15.1 billion dollars in the same period in 2018.

The trend also hit big Chinese names as they take longer to attract investors.

According to Reuters, Fred Hu’s Primavera Capital Group was raising a new U.S. dollar-denominated fund of up to 5 billion dollars. Bloomberg reported that the company was able to close on its 4 billion dollars target.
However, they only have two months left to reach the hard-caps of 4.5 billion to 5 billion dollars.

FountainVest Partners, a private equity firm founded by Goldman Sachs alumni Frank Tang, was also short of its hard cap of $3.2 billion after initiating fundraising in 2020.

According to Bloomberg, it takes fewer than 18 months for a successful fundraising campaign to exceed the hard cap, which is the maximum size allowed under limited partnership agreements.

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