Some Chinese FoFs pioneered the RMB-denominated FoF business. Magic Stone Alternative Investments launched its first RMB-denominated fund of funds in January 2009 with a target of $1bn RMB. Noah Holdings channeled the oversubscriptions to prominent China-focused PE funds into an RMB-denominated FoF vehicle, which had an AUM of RMB3.3bn as of Q4 2012.
RMB-denominated FoFs did not start to emerge at a great extent until late 2009 and, by and large, governments are behind this initiative. According to AVCJ research, only one of the top 10 FoF vehicles by value that were raised between 2009 and 2011 – Noah’s Jingzhao Fund – was backed by high net worth individuals. The rest of the 10 vehicles were backed by government agencies. Shanghai Venture Capital, Suzhou Industrial Park Venture Capital Guidance Fund and Shanghai Pudong Science and Technology Investment are examples of such government guidance funds. These partnerships with governments differ from traditional FoFs in that the primary objective of government guidance funds is not financial but developmental, although some of them are increasingly adopting a market-driven investment approach.
Foreign players have also taken up significant