Top Ten Predictions for China's Private Equity Industry in 2025

2025 is approaching gracefully.

In a way that is expected yet surprising.

At the same time, the private equity industry in mainland China is also welcoming a new round of challenges, with competition, cooperation, and gamesmanship, iteration, extinction, and evolution, regardless of which keyword sings the theme song. The landscape of the private equity industry will obviously "take on a new look" in the coming year.

At this moment of bidding farewell to the old and welcoming the new, the Zhitang team has visited and engaged in dialogue with relevant investment managers, marketing channels, and third-party analysts, gathering numerous opinions from the industry to form the top ten predictions for the private equity industry in 2025.

This reflects our attention and insights into this field, as well as our expectations and hopes for this industry.

Subjective Stock Selection Performance "Revives"

Since the collapse of the "hugging stocks" in 2021, fund managers using subjective stock selection strategies have endured nearly four years of "headwinds," and the performance of related products has left many holders dissatisfied.

However, after the third quarter of last year, with the unexpected rebound of the A-share market, most actively managed strategy products have seen a strong recovery in net value, and many products have significantly outperformed the market index during the recovery process.

In 2025, fund managers using subjective stock selection strategies may continue to experience a "revival" in performance. The market's range-bound fluctuations and the previous sharp decline of small and mid-cap stocks may indicate that this group of active fund managers is experiencing their "spring" again.

Quantitative Giants Return to the 60 Billion "Threshold"

Third-party data shows that as of the end of December 2024, no single institution in China's quantitative private equity camp has assets exceeding 60 billion yuan.

The latest third-party data indicates that among the leading quantitative firms in the industry, JiuKun, MingCheng, and YanFu have scales in the range of 50-60 billion yuan, while KuanDe Investment and LingJun Investment are in the 40-50 billion yuan range. There is only one quantitative giant in the 30-40 billion yuan range, which is ChengQi Asset.

Although the quantitative giants experienced performance fluctuations in 2024 (with a small peak in redemptions), their entrusted scale has shrunk somewhat, it is expected that the potential of this strategy will continue to show. In 2025, it is likely that more than one quantitative institution will surpass the 60 billion yuan scale domestically.

Bond Private Equity Returns to Its Peak

In the past two years, the excitement of the bond market has almost overshadowed most of the "spotlight" of the equity market, but due to historical reasons, the scale and popularity of bond private equity have not been as prominent as during the last fixed income bull market a decade ago.

However, as government bond trends continue to rise, fixed income private equity may actively find development opportunities. In the high-net-worth client and institutional market, some fixed income private equity firms will ultimately find personalized opportunities.

Batch Emergence of "Large Cap Index Increases"

In the past three years, the fundraising focus of quantitative private equity products has been on small-cap index increases, including CSI 500 index increases, CSI 1000 index increases, and other products.

However, with the recent emergence of large-cap stock trends and frequent large-scale fundraising situations for broad-based (large-cap) index ETFs, the product creation focus of quantitative institutions is undergoing a shift Quantitative institutions are issuing enhanced index products. On one hand, they can absorb part of the existing funds from the current trillions of index products through direct yield comparisons. On the other hand, applying quantitative products to large-cap stocks also helps some institutions shake off the rumors of "hunting retail investors."

Some "Big Shots" Fade from the Market

In the past two years, well-known figures in the private equity circles of the primary and secondary markets have gradually "quietly disappeared," even "gone missing." Some have actively withdrawn from the industry, while others have been investigated due to involvement with individuals from other industries.

However, in the past six months, with the recovery of the market, a considerable proportion of private equity investment managers have had unsatisfactory performance.

If these institutions cannot make a comeback and rejuvenate their spirits by 2025, it is likely that there will no longer be space for their development in the future industry. "Fading from the market" is just a matter of time.

A-shares and Hong Kong Stocks Lead the Rally Together

After several years of lagging behind in global market gains, A-shares and Hong Kong stocks are set to bid farewell to their "second-in-command" position in 2024 and enter the midstream of the industry, sparking heated discussions among large private equity firms.

In their various 2025 investment strategies, the choice to invest in A-shares or Hong Kong stocks is a significant differentiating factor for these institutions.

At the same time, the industry does not rule out the possibility that both A-shares and Hong Kong stocks may perform well in 2025. A private equity firm with assets in the hundreds of billions has been particularly optimistic about Hong Kong stocks over the past year, believing that their valuations are low and that a large amount of foreign capital is concentrated in the Hong Kong market. The shift towards bullish positions on China in the global market may yield priority returns. This perspective is worth noting.

Some Institutions Explore New Battlegrounds

In recent years, some institutions with backgrounds in global hedge funds have made substantial profits in the domestic financial market, providing relatively good returns for high-net-worth clients.

These "behemoths"—taking an overseas hedge fund's mainland company as an example—do not solely bet on a specific type of asset but instead engage in a large asset class allocation while incorporating complex derivatives.

The strategies of these institutions may further influence the private equity market in 2025 and attract some foundational domestic institutions to shift towards similar strategies.

Significant Development in Private Equity Distribution Models

Over the past decade, Chinese securities private equity has widely relied on bank private banking departments, brokerages, and third-party wealth platforms for product distribution, leveraging these channels for client services.

As the number of distribution institutions increases (with Ant Group, JD.com, and others entering the fray), along with internal sales reforms at various institutions, this stable and singular sales ecosystem may undergo changes.

In 2025, more wealth sales platforms may join the ranks of product customization, leading to an upgrade and complexity in the relationships between clients, sales parties, and private equity managers. More new products will be supplied.

Foreign "Market Makers" Establish Presence

In November 2024, the overseas significant market-making institution Castle Securities frequently engaged with local management institutions in the domestic market. This may indicate the aspirations of overseas market-making structures for the local market In fact, as more and more market-making varieties emerge, the demand for market-making is exploding in the domestic market.

In 2025, whether there will be breakthroughs in this area is very intriguing.

The Rise of Absolute Return Products

With the comprehensive rollout of domestic pension policies, the demand for absolute returns among domestic investors has been further awakened.

Currently, the supply of medium-yield, low-drawdown products in the industry is still not rich enough, and the pension and investment needs in this area remain unmet.

In 2025, forward-looking institutions may accelerate their layout in this area.

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk