LONDON, UK: Welkin China Private Equity Limited (WCPE) announced its intention to launch an initial public offering (IPO) on the Premium Segment of the Main Market of the London Stock Exchange. The company is targeting a raise of up to US$300 million and expects to publish its prospectus in the coming days.
Welkin China Private Equity Limited is a newly established closed-ended investment company and will be the first fund listed on the London Stock Exchange dedicated to investing in unquoted Chinese companies.
The Company will offer public investors exposure to a broadly diversified portfolio of Chinese private equity investments across sector, stage, maturity, and manager, through a two-pronged investment strategy designed to capture both market dislocation and long-term growth opportunities. WCPE will be targeting an annualised NAV total return of at least 15 per cent over the long-term.
Welkin China Private Equity Limited’s investment manager, Welkin Capital Management (Asia) Limited, is led by an experienced team with deep knowledge of the Chinese private equity market and a proven track record, delivering a compounded annualised return of 28 per cent for all investments in Chinese investee companies made across all Welkin Funds up until 31 December 2021.
Investing in the Welkin China Private Equity Limited’s ordinary shares will allow investors access to the returns available from investing in unquoted Chinese companies with long-term growth potential, an investment class that has traditionally been difficult to access for individual investors.
Strategic diversification: The Company will invest in a broadly diversified portfolio of unquoted Chinese companies across different sectors and investment horizons by taking a flexible and strategic approach to dynamically capture both long-term growth opportunities and market dislocations.
Favourable market timing to achieve outsized returns: There has been a valuation reset in Chinese companies. Welkin believes the growing market dislocations present attractive investment opportunities for investors who know and understand China¡¯s private equity market and who can effectively perform due diligence on opportunities.
Proprietary deal flow: Welkin has strong access to local industry relationships built on the enduring legacies of well-connected families in China. These extensive networks help Welkin generate proprietary deals from trusted referrals and directly access entrepreneurs and asset owners.
Robust pipeline of attractive opportunities: Due to significant deal flow generated by Welkin’s proprietary network, the Company has a large and well-advanced pipeline of potential opportunities of up to US$500 million across both Growth Investments and Tactical Investments.
A seeded portfolio with clear growth prospects: The Seed Assets provide exposure to a diverse portfolio of 10 underlying Chinese companies with a track record of delivering growth.
Liquidity and transparency: Investors in the Company’s Ordinary Shares will be able to access unquoted Chinese companies with long-term growth potential, an investment class that has been difficult to access for individual investors, but with the benefit of high governance standards, public transparency, and the daily liquidity of the London Stock Exchange.
Local experts with an in-depth knowledge of China: Welkin was founded in 2009 by members of well-connected families that have founded or co-founded, built and/or operated leading businesses in China since the beginning of the 20th century, giving Welkin access to unique local networks and industry expertise. Today, Welkin manages approximately US$500 million for global institutional investors including sovereigns and pension schemes.
A track record of success: Welkin has invested across various business and economic cycles. The compounded annualised return of all investments in Chinese investee companies made across all Welkin Funds is 28 per cent. up until 31 December 2021.
Strategic value creation capability: Welkin can use its strong local networks and industry expertise to create strategic value for both portfolio companies and externally managed private equity funds. Welkin believes that China’s private equity market contains many players that value capital partners that can add strategic value. Welkin’s value creation ability helps it source, grow and realise investments in China.
A proven and disciplined investment process: Throughout its 13-year history, Welkin has maintained a consistent investment approach which focuses on fundamental value and pricing discipline, avoids chasing speculative deals and has a track record of adding value to portfolio companies. The past performance of Welkin and its history is, however, no indication of its future performance or the future performance of the Company.
A well-established US$1.8 trillion private equity market: China has a large and well-established private equity market, with a vast number of investment opportunities for the Company. Through independent research, the Investment Manager believes that the market size in terms of assets under management is at least US$1.8 trillion.
Growing domestic exit options: In view of a robust domestic IPO market and increasing M&A activity in China, Welkin believes there are a wide range of executable liquidity options for private equity investments in Chinese companies, in particular, smaller-sized companies.
Exposure to the world’s largest consumer market and industrial base: China has the largest consumer market and industrial base in the world. China’s economy has been the single largest contributor to global GDP growth over the last 30 years, and according to the IMF, this position is expected to continue, with China contributing more than one-fifth of the total increase in the world’s GDP in the five years through 2026.
Low correlation to the global economic environment: The largely domestic and niche market focus of the Chinese companies in which the Company seeks to invest means their business performance and value are often less impacted by geopolitics and global macroeconomic changes. Welkin believes that investments in domestic and niche market focused private companies in China that generate free cash flows in the near to medium term and are lowly leveraged, may exhibit lower volatility in comparison to many other asset classes.
Exposure to future domestic champions: Welkin believes that innovation driven companies will be the engines of China¡¯s economic growth in the coming decades. The Company will adopt a thematic approach to gain exposure to emerging champions that focus on innovation to produce world-class products and solutions and are expected to benefit from changes in government policy that encourage innovation and capital access.