Secondaries opportunities are coming to the fore as valuations mean fewer China-based assets are likely to pursue IPOs, according to Coller Capital.
Speaking on a webinar run by the firm last week, investment principal William Yea noted that, though discounts are bound to happen across various markets in this environment, growth and venture assets may see sharper cuts for China specifically.
“China’s private market has a disproportionate amount of venture and growth,” said Yea. “You can see quite steep discounts for some of those assets where there hasn’t been a markdown in two or three years.”
To create win-win scenarios for buyers and sellers, transactions may need to leverage special arrangements in their agreement structures, Yea noted.
“There are also situations where being creative can be a source of getting a transaction done,” Yea said. “There can be a structure where some upside sharing can be used to bridge the gap between current pricing levels and the NAV.”
Coller’s debut yuan-denominated secondaries vehicle, Secondaries RMB Fund I, has a 1.5 billion yuan ($205 million; €194 million) target.
The firm is not alone in eyeing these opportunities. Schroders Capital has been actively investing overseas capital into China secondaries via the Qualified Foreign Limited Partnership scheme since 2020 and is now seeing discounts as high as 40 percent in yuan-denominated opportunities, the firm’s head of China PE told affiliate title Private Equity International this month.