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PE Circle, a silent tug of war
Strange stories often surface the PE circle, but there has been an unusual abundance this year.
LP and GP conflictions have not stopped, throwing insults and pulling schemes at each other. There is one recently where a “GP kneeled to LP for funds”.
What a shame! Where did all the glory go?
The silent tug of war
GP members must miss last year’s good times, when the market was flowing with money and their lucky god IPO was flourishing.
So why did everything change suddenly?
From the start of the “New Regulations on Asset Management”, everything seems to have changed.
All the gossip that has been circulating makes one think twice before speaking. Following is a summary of this year’s gossips, if any are missed feel free to add them.
In addition to the front-end fundraising of the second-line GP, Miss IR’s price surged overnight, starting at 500,000.
The first-line GP boss San Guzhongjie seeks financing, and GP is trying to raise funds by any means. Seduction is no longer viable.
GP is unable to pay wages, resulting in mass “reverse job-hopping”. Personal LP denounces a well-known GP.
LP complains GP returns have been worse than financial products for years, and many LP have to exit. 3+2 became the bottomless 10+N.
Delayed withdrawing caused the LP of a fund to collectively rage.
And the most recent hot topic “GP kneeled to LP for funds”, what an outrage!
Whether you are an insiders or bystander, these stories would rewrite your worldview, values, and outlook on life.
After studying PE’s books, movies, lectures and forums, all these happenings are highly abnormal!
This current trend in China’s PE industry isn’t ending anytime soon, and the industry image is in shambles.
Recently, a VC manager was mistaken as a PE, and he said “We are not PE, we are VC, and we at least have some technology!”
It seems that this farce in the PE industry was caused by the “New Regulations on Assets Management”, but most people in the circle think that it is only the fuse, and there are other reasons.
LP Anger Keeps Burning
From the perspective of insiders and news information, the accumulation of LP’s dissatisfaction with GP under tightening market funds is the true culprit.
LP’s grievance against GP certainly is not fresh news, but in the past, there was more money in the market, and it didn’t matter as much.
This year’s banks funds are tight, guiding funds are held and listed companies have no money under depression. It’s time for GP’s to hand in papers.
GP’s have high ideals but bare bone realities, and when faced with returns less than bank interests, there is no telling if costs can be recovered. LP’s have all the rights to be furious.
Although the government guidance fund of LP does not have a high rate of return, the leverage ratio and the return ratio are all “golden handcuffs”. Generally, there is no shortage of money. GP is afraid to take this “hot potato”.
In addition, the demand for participation of Chinese LP in investment decision-making is also very high. It is not uncommon for LP to participate in the investment committee, and the extreme examples are as the “double GP” structure.
Even after so many compromises from GP, LP requests are still ridiculous. “Is there guarantee? Is there premium repurchase? Is the listed company docked? Is the government financial guarantee repurchased? What is the major shareholder of the project? “. All these demands may require the GP to be a listed company with magical powers.
Under heavy pressure and competition, everyone is desperately busy. It is common to work 16 hours a day. Some funds claim to get tens of thousands of projects a year. The investment manager searches high and low for investable projects, working deep into the night and meeting entrepreneurs daily. What does he wish to achieve? To find one unicorn!
As a result, he is exhausted, and the project thoughts are often shallow.
So what is the “Unicorn” everyone seeks?
The investment direction in recent years have been GP’s largest headache: sharing economy, Internet of Things, big data, AI, new retail, blockchain…etc.
Everything blows with the wind, investment today may be outdated the next, and effort is easily in vain.
So what can be invested in? Only the unicorn, for only the unicorn has the chance to be listed.
So no matter the high prices or harsh conditions, everyone pounces on the unicorn, some even gave up the most basic research. In the end, the lucky get a negligible share, and the unlucky cannot even make it through the door.
“The financing wonders of Dajiang UAVs” is still talked about to this day.
As for post investment management?
China’s GP is limited by the scale. Usually the same people manage project hunting and post investment management. If 90 percent of resources are spent on looking for and pouncing on projects, why even bother with management?
Quit the nonsense and be practical
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