China’s tech startups have received billions in private financing over the past two decades, with some of those companies going on to make warmly received public market debuts. In 2014, Alibaba had the largest initial public offering in history, raising $25 billion on the New York Stock Exchange. Bilibili, a youth-driven streaming giant, saw its price soar tenfold within three years of its March 2018 listing on the Nasdaq.

However, the glitz of China’s tech listings in the U.S. did little to address the long-standing concerns limited partners had about their returns. In 2019, as Preqin prepared its inaugural report on China’s private equity and venture capital markets, LPs were expressing particular concern about how much cash they were getting back relative to the capital raised. In finance circles, this is known as the distribution to paid-in ratio, or DPI.

Surely China’s U.S. dollar–denominated fund managers would have no issues realizing cash returns. Don’t China’s tech investors make a killing from IPOs?

On the contrary, cash returns are the problem.