Recently, in a VC and PE conference in Shanghai, the participants were saying RMB funds are getting more and more popular and they expected it will become the majority in the future.
Without a doubt, there are advantages for RMB funds. Firstly, it is easier for them to invest in local companies, especially for government regulated projects, such as water treatment, etc. Moreover, with the A-share market offering attractive valuation for tech companies, RMB funds need not to worry about finding exist strategies for invested companies.
In fact, the current situation for tech investment in China is quite odd. All the companies, such as Tencent, Baidu, Alibaba, are operating in China. But they got their initial investment from overseas (the USD fund). So, they had to list in the oversea markets, such as Hong Kong or America.
The phenomenon creates a huge information gap between investors and the companies they invested into. I think that is why Nasdaq listed China tech companies always have their price fluctuated on the slightest rumour.
RMB fund might be able to correct such information gap, as both investors and the companies are inside China. If Baidu or Tencent are traded in the A-share market, their value might be better reflected as investors are the local Chinese, who can use their services on a daily base.
But, there are still many obstacle for RMB funds. The first problems might be lack of LP, or investors for such fund. Although China is getting more affluent everyday, compared with the mature worldwide money market, investment funds in China are still not as abundant. Also, Chinese laws are not well established. If something got wrong, will investors’ right be protected?