Law firm Stephenson Harwood has responded to rising international interest in structuring and establishing RMB private equity funds in China by hiring alternative funds specialist Michael Guilday.
Previously at Linklaters and a partner at Ropes & Gray in Hong Kong, Guilday has experience in structuring onshore and offshore funds in the Asia region. As foreign legal consultant at Stephenson Harwood, he will continue to be based in Hong Kong to strengthen the firm’s investment funds practice in Greater China.
Guilday’s expertise lies in institutional and private investment funds, the operation and regulation of fund management businesses and the taxation of funds and fund investors across Asia.
Above all he has experience in the structuring and formation of alternative investment products, including private equity funds, real estate funds and hedge funds.
Guilday says that the formation of both offshore and onshore RMB private equity funds is gathering pace in China, with a number of large and well-known international firms having relocated key people to the region during the past couple of years.
But he notes that foreign firms are finding it increasingly difficult to invest into private equity opportunities in China solely with offshore capital, given foreign exchange controls and restrictions governing foreign direct investment and taxation.
There is also an increasing focus by tax authorities on the use of offshore investment structures for foreign investment in China. “Going forward, it is likely that you will need to structure China investments using RMB capital exclusively, or alternatively a mix of offshore capital and RMB capital,” he says.
Another trend he has witnessed over the past two years among foreign private equity players in the region is that many are now looking beyond fundraising to broader issues such as setting up formal fund management operations in China and moving investment professionals onshore.
Many foreign firms are taking advantage of incentives being offered by provincial Chinese governments in places such as Beijing, Shanghai and Tianjin. Incentives include tax breaks on certain investment opportunities, office rental subsidies, personal tax concessions and rental allowances.
“The funds which have been successful in raising capital and getting incentives tend to have partnered state-based entities, such as local government agencies or state-owned-enterprises,” he says.
Through the hire of Guilday, Stephenson Harwood is seeking to bolster its regional investment funds platform. The firm already has partner Mark Reed, who has a financial services practice covering licensing, compliance and investment deal advice, and partner Paul Westover, who caters to the hedge fund segment.
There has been a wave of international law firms seeking to build up their investment funds practices in the region. Earlier this year Boston-based Bingham McCutchen expanded its investment management group to Hong Kong, and London-based Simmons & Simmons announced a new office in Beijing.
The investment funds industry has also seen an increasing number of Chinese asset management companies seeking to set up international arms in Hong Kong, with some experimenting by setting up alternative platforms in addition to their traditional retail funds business.
Lindsay Wright, vice-chairman of Harvest Global Investment, has said she sees tremendous potential in the alternatives arena. She recently told AsianInvestor that the company was building Harvest Alternative Investment Partners to incorporate hedge funds, private equity and real estate, with a Greater China and Asia focus.
Guilday says he is seeing increasing sophistication among Chinese AMCs in terms of investment products, and confirms he is gearing up to lend his experience on the alternatives side, a segment which he anticipates will grow substantially in coming years.