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Yuan-denominated PE secondary deals value hit record high

in H1

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China assets trading at steeper discounts in secondary

trades

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Improved market sentiment should be conducive to secondary

deals

By Kane Wu

HONG KONG, Aug 20 (Reuters) - Secondary trades of

private equity assets in China are poised to accelerate after a

robust first half, with Canada's No.2 pension manager and a

China-focused buyout fund among those looking to divest such

assets worth potentially billions of dollars, sources said.

A private equity (PE) secondary trade refers to the buying

and selling of PE fund portfolios or their direct shareholdings

in private companies, allowing investors to exit their positions

outside the typical investment cycle.

The steep discounts being offered by the selling funds are

expected to attract buyers who have confidence in China's

longer-term economic prospects, industry sources said. Many of

the selling funds have to repay their own investors and are

struggling to find trade buyers or float the assets on public

markets due to economic headwinds and geopolitical risks.

Canada's Caisse de dépôt et placement du Québec (CDPQ), for

example, which stopped making PE investments in China two years

ago, is considering selling about $2 billion worth of assets via

secondary trades, most of which are from China, said two people.

China-focused buyout fund CDH Investments is also aiming to

raise a multi-asset continuation vehicle to allow some investors

to cash out from its existing fund's portfolio, they said.

A continuation fund is a new investment vehicle created by a

PE firm to transfer holdings of some existing investments, which

allows investors to maintain or exit their stakes in the assets.

CDPQ declined to comment. A CDH spokesperson did not respond

to a Reuters request for comment.

The people, who are familiar with the matter, did not wish

to be identified as the talks are confidential.

A total of 731 secondary trades involving yuan-denominated

funds were completed in the first half of 2025, hitting a record

77.3 billion yuan ($11 billion) and logging an 89% year-on-year

growth, according to Chinese data provider ZERONE.

Data for secondary trades involving U.S. dollar-denominated

assets in China is not publicly available, industry sources

said.

It is a good time for investors who have a long-term

view on China to buy quality assets on the cheap with reduced

regulatory risks, global alternative asset investor LGT Capital

Partners said in an industry insight white paper published in

July.

"We expect the majority of capital we are going to deploy in

China in the short to medium term to be via secondaries," Doug

Coulter, LGT's Hong Kong-based partner and head of Asia Pacific

private equity, told Reuters.

SWELLING SUPPLY

LGT announced in June that it was the co-lead investor in

continuation vehicles worth a total of $500 million for a

portfolio of 13 assets managed by China-focused venture capital

fund IDG Capital.

LGT declined to disclose the discounts the assets were

traded at.

Singapore sovereign wealth fund GIC also invested

in IDG's continuation vehicles, primarily buying shares of

social media company Bytedance, said the two people.

GIC declined to comment. IDG did not respond to a Reuters

request for comment.

Globally, secondary market deals have also hit record

volumes, reaching $103 billion in the first half, according to a

report by investment bank Jefferies, as the lack of capital

distribution from IPOs and M&A deals fuels supply.

Quality China assets are being sold in the secondary

market at 40%-50% discounts to net asset value (NAV), said

Coulter. That compares with the roughly 10% to 20% discounts to

NAV for U.S. assets in the secondary market, industry sources

said.

The improved market sentiment in China should be

conducive to PE secondary deals, industry sources said.

China's onshore benchmark CSI 300 is up 7% so far

this year, while Hong Kong's Hang Seng Index is up 25%.

"We believe the sentiment of investors about China has

generally improved," said Mingchen Xia, managing director and

co-head of Asia investments at investment management and

advisory firm Hamilton Lane.

He said that "the softened geopolitical tensions and largely

settled tariff negotiations" by some major economies should give

some comfort to investors.

(Reporting by Kane Wu in Hong Kong; Editing by Sumeet

Chatterjee and Muralikumar Anantharaman)