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Social security fund has scope to expand in VC, PE

Updated: 2012-03-29 07:49

By Cai Xiao (China Daily)

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The National Council for Social Security Fund, China's largest limited partner, has only invested 2.2 percent of its money into the venture capital and private equity sectors, and there is ample room for growth, said Wang Zhongmin, vice-chairman of the SSF, on Wednesday.

"Under the rules, up to 10 percent of the social security fund can be used for venture capital and private equity investment, and the ratio at the end of 2011 was only 2.2 percent," Wang said.

"While the securities market is volatile, the primary market is full of investment opportunities for us to seek and seize."

Wang said the fund has committed to invest nearly 20 billion yuan ($2.63 billion) in 10 venture capital and private equity investment firms managing 13 funds, and about 12 billion yuan has already been invested.

In 2011, the SSF invested in five new funds managed by five companies, including CDH Investments. CDH received money from the SSF for another fund in 2008.

The assets of the SSF totaled 856.7 billion yuan at the end of 2010, according to its annual report.

Wang said the SSF has shown interest in domestic and foreign firms that are involved in venture capital and private equity.

Chinese companies know local operations better, Wang said, while foreign ones have more standardized rules.

According to Wang, although the SSF's investment holding period has not been long, he is satisfied with the performance that it has achieved.

Even in 2011, when the market was weak, the overall investment return on the SSF was positive.

Wang said every emerging industry can develop rapidly in China because there is sufficient capital and labor, so it is vital for investors to look for new opportunities rather than follow others.

"There are lots of opportunities in the high-end manufacturing sector waiting for investors to discover them," Wang said.

He praised the contribution venture capital and private equity firms had made in helping Chinese companies complete overseas mergers and acquisitions.

"For instance, the Chinese low-end manufacturing market has become saturated, so more companies should try to produce high-end equipment. Sany has set a good example in this way," said Wang.

Sany Heavy Industry and Citic PE Advisors this year acquired Putzmeister, a well-known construction equipment manufacturer in Europe.

The Chinese private equity market is still in its infancy and is short of strong limited partners. Leading private equity companies, including Blackstone Group LP and Carlyle Group, are seeking cooperation with the SSF.