As Valuations Rise, China Private Equity Executives Retire

Amid increased competition and rising valuations, some executives in China’s private equity market are stepping out of the game. Benjamin Cheng, a China partner with London-based private equity shop Actis, will retire after seven years at the firm, Reuters reported. Cheng’s retirement comes shortly after the Financial Times reported that two of the three founders of Beijing-based Hopu Investments planned to retire as the firm winds down investments, Reuters said.

(Reuters) – One more leading private equity industry executive plans to retire amid rapidly growing dealmaking competition in China.

Benjamin Cheng, a China partner for London-headquartered private equity firm Actis, has decided to retire from the firm that he joined in 2003 and helped invest in new technology and consumer companies in the past few years.

“I have decided to take a break from work and will retire from Actis. Before fully disengaging, I will help finish one exit for Actis,” said Beijing-based Cheng in a personal email sent to friends on Thursday and seen by Reuters.

Cheng, one of the earliest China-focused dealmakers, who started his private equity career in the mid-1990s, was not immediately available for comment.

The retirement plan of Cheng, a lawyer turned dealmaker, comes as foreign dealmakers are increasingly vocal about the difficulties securing deals in China, mainly caused by fast-rising asset valuations.

Foreign funds have also complained about the rapidly changing regulatory environment in China making capital-raising from local investors more difficult.

On Wednesday, British newspaper the Financial Times reported that two of the three founders of Beijing-headquartered Hopu Investments planned to retire and the fund would exit its remaining investments. Hopu declined to comment.

Fang Fenglei, a top financial figure in China with close personal ties to Wang Qishan, Chinese Vice Premier in charge of the financial industry, teamed up with former top Goldman Sachs Inc (GS.N) Asia banker Richard Ong and former KPMG [KPMG.UL] partner Dominic Ho to set up Hopu in 2007.

In 2008, Hopu completed raising a $2.5 billion China fund with capital contributions from Goldman and Singapore’s state-owned investor Temasek Holdings [TEMA.UL].

Ong and Ho planned to retire from Hopu, which would not launch a second fund, according to the FT report citing people familiar with the matter.

The private equity industry has only a short history in China, but has become a popular career move for many former investment bankers following the global financial crisis.

Many bankers quit their high-flying investment banking careers to set up private equity firms in which they wanted to have greater control, however such industry trends also made competition for deals in China tougher than ever.

Private equity executives are often among the most highly paid financial professionals in China. A junior associate at a global private equity firm focusing on China deals can easily earn more than HK$1 million ($129,000) excluding bonus but that also requires long hours and extensive business travel.

One of nine transactions Cheng was involved in is Taizinai, according to Actis’ company website. Taizinai was one of the most popular local dairy brands but the company ran into a series of financial problems in 2009, Chinese media reported. (Editing by Chris Lewis)