China's Relationship with and Private Equity

Welcome to this week's Capital Call - your Wednesday dose of private market insights without the jargon. At OneFund, understanding market shifts is crucial for making informed investment decisions.

Pour yourself something nice and dive in. 

🚪 WHO WE ARE We help qualified investors access the same private equity and VC funds that have traditionally been reserved for the ultra-wealthy and institutions. No million-dollar minimums or confusing paperwork. Why should only billionaires get the good stuff?

🧠 THE BIG IDEA

China's Great Wall of Silence: When Geopolitics Meets Markets

The boardrooms of America's largest private equity firms are experiencing an unexpected shift. Chinese state-backed funds—once eager participants in U.S. private markets—are executing a strategic retreat that's sending ripples through certain fundraising.

According to news reports this week, China's sovereign wealth funds aren't just pausing new commitments to U.S. private capital firms—they're actively backing out of planned allocations where final commitments haven't been secured. This withdrawal comes amid escalating trade tensions between Washington and Beijing.

Yet the bigger picture remains robust. As Chinese capital steps back, the overall PE industry enters 2025 with significant momentum and $1.4 trillion in dry powder waiting to be deployed. Nearly three-quarters of general partners surveyed expect deployment activity to increase over the next six months, reflecting a broadly optimistic outlook despite geopolitical headwinds.

📈 MARKET MOVERS

💸 Chinese SWFs Seeking Exclusion From U.S. Assets: According to reports published April 21, some Chinese sovereign wealth funds are not only backing away from U.S.-headquartered PE firms but also requesting exclusion from investments in U.S. companies made through global buyout groups based elsewhere. This unprecedented move reflects the deepening geopolitical rift between Washington and Beijing. View the details

🏦 AI Dominates VC Funding Amid Market Uncertainty: In Q1 2025, AI startups attracted 71% of global venture capital investments, totaling $91.5 billion. This surge underscores AI's central role in the venture ecosystem, even as broader market instability tempers expectations for a 2025 resurgence. The concentration of funding in AI suggests a potential narrowing of investment focus, raising questions about diversification and long-term sustainability in the VC landscape. See the trend analysis

✂️ Bank of England May Accelerate Rate Cuts: Potential rate cuts could boost PE/VC valuations in the UK market. Lower borrowing costs may revive leveraged buyouts and stimulate deal activity, particularly in sectors sensitive to financing conditions. Some managers are already positioning for a more favorable debt environment. Read the forecast

📉 Gold Hits Historic High On Geopolitical Tensions: As tensions between China and the U.S. escalate, gold prices reached a new all-time high on April 21, driven by risk-averse sentiment in the markets. This flight to safety reflects growing investor concerns about the expanding trade war and its potential impact on global economic stability. Read the analysis

🔍 DEEP DIVE

Geopolitical Shifts and Markets: Navigating the New Landscape

Chinese capital withdrawal represents a meaningful shift in global investment flows. Firms like Blackstone, Carlyle, and Thoma Bravo have all previously enjoyed backing from Chinese state investors, including China Investment Corporation (CIC). These relationships are now being reassessed in light of evolving geopolitical realities.

Despite these challenges, there are several positive indicators for private markets:

Growing deployment expectations: According to EY's survey, 73% of GPs expect increased deployment activity in the coming six months, supported by narrowing valuation gaps and improved macro visibility.

Surging exit opportunities: Exit activity rose 23% by value and 16% by volume globally across all channels last year, with secondary buyouts showing particular strength. The percentage of GPs expecting increased exits has jumped from 34% to 57% year-over-year.

IPO revival on the horizon: GPs' top expectation for 2025 is an increase in IPOs, building on last year's momentum when PE-backed companies represented nearly half of all IPOs by volume and 12 of the 20 mega-IPOs.

While Chinese capital realignment requires adaptation, many LPs are viewing this as an opportunity to reassess portfolio exposure and shift allocations to different geographies and sectors. Market dislocations have historically created attractive entry points, and the dry powder available positions disciplined investors to capitalize on these shifts.

🧰 TACTICAL TAKEAWAYS

• Sovereign LP diversification: Many LPs are watching how sovereign political shifts impact cross-border capital—China's PE pullback could foreshadow other geopolitical capital disruptions requiring broader LP base diversity.

• Rate environment preparation: Some managers are preparing for high interest rates to persist longer than expected by slowing capital deployment and focusing on cash-generating assets with strong inflation protection characteristics.

• Deal structure evolution: As macroeconomic uncertainties persist, expect an increase in creative deal structures including earnouts, seller financing, and minority investments that allow for capital deployment while managing downside risk.

🗳️ COMMUNITY POLL

🧵 WEEKEND READS

(Because some light market analysis pairs wonderfully with Saturday coffee)

• 🤖 Secondary Market Transactions Hit Record Highs - Secondary PE trades reached record levels in 2024 according to Jefferies and Lazard, with both firms projecting continued growth and innovation throughout 2025 as investors seek alternative liquidity solutions.

• 📊 Executive Insider Selling Before Tariff Announcement - Executives from some of America's largest companies reportedly sold shares during Q1 2025, just before Trump's tariff announcement rattled markets, raising questions about information flow and timing.

• ⚖️ Private Equity Fuels Growth for UK Law Firms with £1.2bn Backing - PE's role in driving consolidation across professional services is enabling mid-sized firms to scale through mergers and technology investments, potentially signaling broader interest in traditionally conservative sectors ripe for modernization.

👋 WANT IN?

In these turbulent times, understanding the nuances of private market investments is more crucial than ever. Schedule a discovery call with OneFund further discuss private equity and the current market..

Let's Talk →

The OneFund Team

Capital Call is curated by real humans who actually read the articles we share. Your financial future deserves better than an algorithm.