High Concentration of Chinese Private Equity Sector Triggers Risk Concerns

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The peak body for China’s fund management sector has expressed concern over the high level of concentration in the country’s USD$2 trillion private equity industry.

The Asset Management Association of China (AMAC) has warned that certain private equity companies have become sources of systemic risk following high levels of concentrated ownership and creation of complex networks of investment and fund-raising.

Over 86% of the 24,368 private fund managers registered with AMAC are under the control of less than 2,000 people, according to sources speaking to Caixin.

As of the end of August these 24,368 registered fund managers had provided 79,210 products worth a total of 13,38 trillion yuan.

A senior AMAC official said that the controlling shareholder of one conglomerate situated in eastern China presides over 400 fund management firms that invest in each other’s products.

AMAC has committed to stepping up scrutiny of the sector, as well as imposing stricter requirements for registration, including refusal to accept funds that offer guaranteed yields or invest in unapproved areas such as real estate.

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