Asian family offices flock to GBA fund for targeted growth plays
Asian family offices and mid-sized institutional investors have shown strong interest in the new government-backed Greater Bay Area-focused special opportunity fund recently launched by state-owned Shenzhen Capital International and Value Partners.
The fund aims to capitalise on opportunities from undervalued companies in both public and private markets in southern China’s Greater Bay Area (GBA) and actuate their growth potential through various business and financial strategies, such as restructuring, privatisation, and capital structure optimisation.
“So far, we have seen keen interests from family offices and some mid-sized institutional investors mostly within the Asia region,” said June Wong, chief executive officer of Value Partners Group.
“We are also having some preliminary discussions with some investors outside of the region (e.g. in Europe) as they have shown interest to understand more about investment opportunities in the Greater Bay Area and how our fund can help them tap into these growth opportunities in a differentiated manner against typical public or private equity investments,” Wong told AsianInvestor.
Source: Value Partners Group
Shenzhen Capital (International) Asset Management, also known as Shenzhen Capital International, and Value Partners jointly launched the GBA-focused special opportunity fund on June 30.
Shenzhen Capital International will be the general partner (GP) of the fund, and will also serve as investment managers together with Value Partners. Value Partners is also a limited partner (LP) of the fund, which will ensure alignments of interest with other LPs.
Shenzhen Capital International, founded in 2007, specialises in strategic investments as well as mergers and restructuring. It is a wholly owned subsidiary of Shenzhen Capital Holdings, a state-owned capital operation company under the Shenzhen State-owned Assets Supervision and Administration Commission.
Through the strategic partnership with Value Partners, the fund will identify undervalued companies, and utilise both firms’ investment resources and connections across mainland China and Hong Kong to help portfolio companies, especially Hong Kong-based companies, to realise stronger growth by expanding into the broader Greater Bay Area markets.
The size of portfolio companies will vary but the fund will mainly focus on small and mid-cap companies, with typical market capitalisations of between $200 million and $2 billion, said Wong.
“Hong Kong-based companies are undervalued, often due to their limitation to the local Hong Kong market,” according to a press release.
“Equipping these companies with the right experience, network, and know-how to expand their businesses into the broader GBA region will not only deliver attractive total returns for investors, but also contribute significantly to the economic and social development of the GBA, further cementing Hong Kong and Shenzhen's pivotal roles as the dual-engine of the region's development,” the firms said.
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Value Partners’ Wong told AsianInvestor that not all undervalued companies would experience short-term distress, and that undervaluation might arise from more structural issues.
Hence, the fund has a multi-strategy approach involving business and financial enhancement strategies such as restructuring, and mergers and acquisition.
"This investment partnership is aligned with the GBA initiative to foster stronger collaboration between Shenzhen and Hong Kong, as well as economic and social development of the region,” said Alick Dong, president of Shenzhen Capital International.
The two firms declined to comment on the targeted size of the fund or when its first close or investment would be made.
The Guangdong-Hong Kong-Macao Greater Bay Area, or GBA, is an 11-city cluster consisting of Hong Kong, Macao, and nine major cities in southern China’s Guangdong province, including Shenzhen and Guangzhou. It is home to over 86 million people and posted a GDP of Rmb13 trillion ($1.8 trillion) in 2022.
The GBA is central to China's strategic plans, envisioned as a world-class megalopolis with advanced technologies and a modern lifestyle to rival the San Francisco Bay Area.
China’s plans for the region are also seen as presenting key opportunities for Hong Kong to leverage its position as a financial centre to attract global investors.
In another development, the Communist Party of China and the State Council, in a rare move on July 19, jointly issued 31 guidelines on boosting the country's private economy, pledging to improve the business environment, policy support and legal protections for the private sector.