In recent years, Renminbi funds have taken a clear dominant position in China's equity investment market.

At the same time, due to factors such as geopolitical issues and economic pressures in China, the pace of investment by foreign institutions in China has relatively slowed down.

Data from Zero2IPO Research Center shows that the fundraising of foreign currency funds remains in a sluggish state, with only 17 foreign currency funds completing a new round of fundraising in the first half of 2024, a year-on-year decrease of 48.5%.

The fundraising scale is about 13.087 billion yuan, with a year-on-year decline of 67%.

"Although some foreign institutions have become cautious about investing in China, we still need to continue investing in China.

From the perspective of China's fundamentals, economic mass, and scale, China is a huge market that cannot be ignored and still has investment opportunities.

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It's just that our investment methods and strategies need to be adjusted compared to the past decade," said Xia Mingchen, Managing Director and Co-Chairman of Asia-Pacific Investment at Hamilton Lane, at the AVCJ Private Equity Forum in China recently.

It is understood that Hamilton Lane, founded in Philadelphia, USA in 1991, is one of the world's largest private equity investment institutions.

Over the past decade or two, Hamilton Lane has mainly invested in China through dollar funds.

In the past two years, Hamilton Lane has been actively promoting Renminbi fund business in the Chinese market and embracing the Chinese market in a more localized way.

"Macro-wise, we maintain a relatively cautious attitude.

At the same time, micro-wise, we see a lot of bright spots and investment opportunities in different fields.

We hope that the capital invested in China has a higher probability of investing in better companies, which can ultimately bring good investment returns," said Guo Yiyang, a partner at Adams Street Partners.

As an old-line dollar fund of funds, Adams Street Partners has been investing in China since the early 2000s.

Guo Yiyang said that at this stage, the globalization of Chinese enterprises is one of the important investment themes that Adams Street Partners focuses on in the Chinese market.

At the meeting, several investors from foreign institutions also shared the views of overseas LPs on the Chinese market and their judgment on the current investment opportunities in China.

In recent years, state-owned capital and government investment funds have become the main force in China's private equity market.

For overseas LPs, how to consider the Chinese market at this stage?

At the meeting, a partner of a dollar fund of funds that has been deeply involved in the Asian market for a long time said that in the past 15 to 20 years, the Chinese market has brought very rich returns to overseas LPs.

At present, the Chinese market is facing both short-term pain and long-term structural changes.

Overseas LPs are continuing to pay attention to the Chinese market, but affected by factors such as the real estate cycle, economic cycle, and changes in population structure, looking forward to the investment prospects in China over the next five to ten years, overseas LPs need to reset expectations.

Another senior investor from a foreign institution believes that although many overseas LPs are cautious about the Chinese market at this stage, in the medium and long term, compared with other global markets, China still has many unique fundamental characteristics.

For example, China's economic mass is huge, and the population and consumer scale are also very large.

At the same time, China has a huge manufacturing industry chain and a rich reserve of science and engineering talents.

From these factors, it will be beneficial to the transformation and development of China's economy.

Although there are concerns that China will gradually enter an aging society and the birth rate is declining.

However, Japan, which has entered an aging society and has a low birth rate, has been very popular with international investors in the past two years.

Therefore, the population structure may not be a decisive factor affecting international investors' willingness to invest in China.

Talking about the current investment opportunities in the Chinese market, the globalization of Chinese enterprises has become a direction of common concern for domestic and foreign institutions.

Hu Xiaoling, a founding partner of CDH Investments, believes that in the next 20 years, China will emerge a group of multinational companies with real technological strength, manufacturing strength, and operational strength.

Growing together with these companies and seizing market share in the global market will bring new rounds of investment opportunities.

The globalization of Chinese enterprises is also one of the important investment themes that Adams Street Partners focuses on.

Guo Yiyang said that currently, Chinese entrepreneurs have more international experience and the willingness to develop globally.

At the same time, many Chinese enterprises in various fields show two significant characteristics in the international competitive environment.

First, the ultimate cost performance.

Due to factors such as China's supply chain resources and population base, Chinese enterprises can easily achieve scale effects and reduce costs; second, the speed of technological progress and product iteration of Chinese enterprises is very fast.

Some original technologies may not have appeared in China at the beginning, but Chinese enterprises are catching up very quickly.

"So in the past few years, we have seen more and more Chinese enterprises becoming world-leading enterprises.

We believe that there will be more such enterprises in the future, and I am very optimistic about the prospects of Chinese enterprises on the international stage," she said.

In the process of continuous changes in the external environment, the specific investment strategies of some foreign institutions in China are also being adjusted.

Xia Mingchen pointed out that in terms of dollar fund business, Hamilton Lane will continue to select high-quality assets for investment.

At the same time, he believes that the future Chinese PE market will be a market dominated by Renminbi funds.

As a foreign institution, Hamilton Lane will continue to promote localization, do some innovative business and investment models, and seize the opportunity of Renminbi.

It is understood that in the past two years, Hamilton Lane has been actively promoting Renminbi fund business.

In May 2022, Hamilton Lane announced that it had obtained the QFLP (Qualified Foreign Limited Partner) pilot qualification in Shanghai, becoming the first S fund established by QFLP in Shanghai.

Last year, Hamilton Lane's Shanghai office also officially started operations.

Talking about the specific practices of promoting Renminbi fund business in a market-oriented way, Xia Mingchen said that in China's Renminbi fund market, the proportion of state-owned capital and government investment funds is very high, accounting for 80%.

The remaining market-oriented funds can account for 20%, which is actually a very large market size.

When raising Renminbi funds, Hamilton Lane will consciously choose more market-oriented institutions such as insurance companies and bank wealth management to discuss cooperation.

"Facing state-owned capital and local governments, we also try to cooperate in a market-oriented way.

Some requirements we cannot meet, we try not to promise.

For example, we mainly do S investment, and it may be impossible to return investment, so we will manage expectations with partners from the beginning," he said.

In addition to Hamilton Lane's continued layout in the Chinese market, many foreign institutions are setting up new offices in China one after another, increasing their layout in the Chinese market.

This year, KKR's Kaide Private Equity Fund Management (Shanghai) Co., Ltd. completed the record filing of private equity fund managers, and KKR's new office in Shanghai also officially opened.

At the same time, the world-renowned alternative asset management company Brookfield established Brookfield (Shanghai) Private Equity Fund Management Co., Ltd. in Shanghai, focusing on the fields of private equity and venture investment.

In October last year, Temasek's wholly-owned subsidiary Danming Capital settled in Shanghai, causing quite a stir in the industry.

It is understood that Danming Capital operates independently and raises funds independently.

Its first fund, True Light Fund I, has raised 3.3 billion US dollars (24 billion yuan), attracting global investors including sovereign wealth funds, foundations, financial institutions, and family offices.

"We have a long-term optimistic view of China's economy and have been investing in the Chinese market for a long time.

For many foreign investors, we have more experience in investing in China and understand the next step of China's economic growth.

Therefore, when many global investors do not know how to participate in China's investment, they will choose to participate in Danming Capital's new fund as LPs," Temasek said in an interview.