Private equity firms that amassed more than $1.5 trillion of assets in China in just two decades are now struggling to offload once-promising investments they were counting on for hefty returns.
With public markets in a slump and offering unattractive valuations, buyout firms are exploring private sales. But mounting concerns about the risks of investing in mainland China have left so-called secondary buyers demanding discounts of 30% to more than 60%, according to people familiar with the market. Haircuts in Europe and the US are closer to 15%.
Many firms are also looking at an alternative strategy, putting off sales by setting up so-called continuation funds to take over holdings for several more years, according to interviews with about a dozen of private equity investors and advisers. That’s also proving challenging.
Cathy Chan & Preeti Singh | Yahoo Finance