China launches huge fintech fund-of-funds

Blockbuster finance entity aims to spur growth of Asia-Pacific’s fintech sector in fields such as AI, Big Data and blockchain

A $1.5bn fund-of-funds (FOF) designed to stimulate investment and M&A activity within the Asia-Pacific fintech scene has opened for business in China.

Created by an 11-strong consortium of fintech firms, private equity lenders and state-owned enterprises, the Asia FinTech FOF will identify and exploit growth potential for new-wave financial services providers within a range of hot topic technologies.

Its efforts will add to those of Beijing’s $4.5bn Zhongguancun Fund of Funds – launched in July last year – which is already working to open up avenues for investment in the region’s fintech sector.

Entities behind the new FOF include Jilin Province Investment Group Corp, China Huarong International, Shanghai Xinhua Distribution Group and the Hong Kong-listed Credit China FinTech Holdings Ltd.

Sheng Jia, executive director at the latter organisation, said: “Leveraging on the fund partners’ experiences and competitive advantages in brand recognition, industry resources and expertise, the fund aims to invest in innovative fintech enterprises with potential and help them to be… leaders.”

He added: “Our investment will centre on leading companies in the fields of Big Data, artificial intelligence, cloud computing, mobile payment, supply-chain financing and blockchain.”

Asia FinTech FOF managing partner Xie Sha confirmed to China Daily that the fund already has projects under way in some of those technologies. “Fintech is reshaping the financial business,” he said, noting that the fund is “an opportunity that neither traditional financial institutions, nor technology firms, want to miss”.

According to a recent DBS and EY report The Rise of Fintech in China, Asian fintechs attracted $9.6bn of investment during the first seven months of 2016 – eclipsing North America’s $4.6bn and Europe’s $1.8bn.

However, the ‘fund of funds’ model has attracted a measure of criticism within China’s financial community.

Among its detractors is the Asset Management Association of China (AMAC), which says that the number of venture capital funds in the nation has ballooned from 552 at the beginning of 2015 to 1,216 as at the end of October last year.

In early December, AMAC general secretary Jia Hongbo aired his concerns over these blockbuster funding bodies at a conference of finance professionals.

“We are concerned about the consequence of massive flooding of capital from some institutions,” he said, “including local government-backed policy guidance funds and fund-of-funds.

“The volatility and the size of the incoming funds could be a disaster to early-stage investing.”

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