Ping An hits regulatory wall on RMB funds

Ping An Insurance Group has been prevented from investing in two domestic private equity funds, in accordance with a Chinese regulation that forbids insurers from investing in domestic private equity funds that are not co-managed by the insurers themselves, according to a report from Z-Ben Advisors.

The China insurance giant “pulled out” of the RMB funds of CITIC Private Equity Funds Management and CICC’s Jiatai fund, according to a report from Z-Ben Advisors.

The Notice of the Insurance Fund Investment in Equity and Real Estate, issued in July by the China Insurance Regulatory Commission, prohibits China’s insurance industry from investing in domestic non-insurance GPs, according to Lillian Zhu, analyst at Z-Ben.

“This will tell all Chinese private equity funds that it’s not that easy to obtain insurance funding,” Zhu told PE Asia. Basically, if domestic RMB funds want to have insurance companies as LPs, they will need to form a joint venture fund, Zhu said.

Although the regulation was issued five months ago, Ping An only just pulled out of CITIC PE's and CICC’s funds last week, according to the Z-Ben report.

However, Ping An’s withdrawal did not affect CITIC PE’s fund status, according to a spokeswoman for CITIC PE. Ping An had expressed interest in the fund, but had not reached the due diligence stage when it withdrew.

She declined to provide any details of CITIC PE’s RMB fund. But according to Zhu from Z-Ben, Ping An withdrew from CITIC Private Equity Fund III. PE Asia's data division shows that Fund III closed on its RMB 10 billion (€1.2 billion; $1.6 billion) target in May.

Ping An and CICC did not respond to requests for comment by press time.

Ping An currently has RMB 2.5 trillion assets under management, but only RMB 39 billion is allocated in private equity, according to PE Asia's data divison.

Although China’s insurance industry was cleared for investing in domestic private equity earlier this year (with the above restrictions), regulations tend to work on a case-by-case basis with the insurance industries, says CITIC's spokeswoman.

In the past, domestic GPs have set up joint venture funds with insurance companies, according to Z-Ben’s Zhu, and she named two prominent ones: Hony Capital set up its RMB 10 billion Hony PE RMB Fund II in cooperation with China Life Insurance Company in 2010; and CITIC PE’s Fund III was set up in cooperation with China Life Insurance, which committed RMB 2 billion to that fund, according to PE Asia’s data division.