China’s unicorn funds launch but attract lukewarm interest

Once marketed with great fanfare as an “epoch-making gala for investors,” China’s six “unicorn” funds have quietly begun operations – alongside Xiaomi Corp’s lackluster Hong Kong debut – after raising just one-third of their original targets.

The six funds, launched on Monday to support Chinese mainland listings of homegrown tech firms such as smartphone maker Xiaomi and e-commerce giant Alibaba Group Holding, originally sought to raise 300 billion yuan ($45.33 billion) from retail and institutional investors.

But they ended up with only 104.9 billion yuan among them, according to statements published over the weekend.

The shortfall reflects reduced appetite for much-hyped tech IPOs in a market roiled by trade war fears. The funds were promoted as a special opportunity for mom-and-pop investors, who have been allowed for the first time to participate in tech IPOs as cornerstone investors, along with institutions.

Some investors have drawn parallels between the unicorn funds and China’s first outbound “QDII” funds promoted by the government 11 years ago. Those funds burned investors after global markets collapsed during the 2008-09 financial crisis.

“The smell is very similar,” wrote Huang Tao, strategist at Beijing Heju Investment, adding that in both eras, valuations of overseas tech firms were near historic levels and were surrounded by hype. “I believe history will repeat itself.”

In a potentially ominous sign, Xiaomi shares fell as much as 6 percent during their debut in Hong Kong because of valuation concerns.