Chinese independent financial adviser (IFA) Noah is aiming to launch a US dollar fund of private equity funds this year out of its fledgling Hong Kong office targeted at high-net-worth individuals.
In doing so it is seeking to replicate a successful strategy it has run in mainland China since May 2010, when Noah (China) set up a RMB-denominated fund of PE funds, raising Rmb500 million.
Run by a team of 10, this is a closed-end fund only available to HNWIs in China through private placement, and by the end of last year the fund's AUM had quadrupled to Rmb2 billion.
Most of its underlying PE funds are RMB growth capital funds that invest in unlisted firms within the consumer, healthcare and green tech sectors. These PE funds typically exit deals via an IPO in the domestic A-share market or a trade sale.
Now Noah’s freshly minted Hong Kong subsidiary is on a mission to launch a similar product this year. Shang Chuang, its deputy general manager in Hong Kong, discloses that the new fund will be denominated in US dollars and fundraising will be done offshore.
“At this stage we are still developing this product but we hope to launch the fund this year,” he tells AsianInvestor.
Chuang says the new fund’s focus will be GPs in China, stressing that Noah's value-add is the GP selection process in terms of assessing their investment experience, track record (of good exits), investment philosophy, process and execution.
“Leveraging our knowledge in the PE space and GPs [general partners] in China, our core competency is PE fund selection and risk diversification," he says. "Generally we invest in six to eight PE funds of different strategies.”
Chuang does not rule out offering a fund of hedge fund product to clients out of Hong Kong, although its team is still trying to familiarise itself with existing hedge fund players in the city.
With a total of just five staff in its Hong Kong office, Chuang says Noah’s priority is “to research and study the deep pool of financial products available in Hong Kong to serve the immediate needs of our existing clients in the mainland to invest offshore”.
He notes, too, that the Hong Kong subsidiary was born out of client demand. “Over the last two or three years our clients have urged us to set up an offshore office to meet their needs in managing wealth overseas,” Chuang says. “We started to prepare the Hong Kong office in the second half of 2011 and obtained a licence from the SFC in January.”
Noah bills itself as the first listed Chinese independent financial planner to receive a licence from Hong Kong’s Securities and Futures Commission to offer investment advisory services, and the only one listed on the New York Stock Exchange.
At present about 70% of Noah’s clients in China are entrepreneurs and many of them spend a lot of time travelling between Hong Kong and the mainland.
That said, acquiring clients in Hong Kong is a priority for Noah, and Chuang indicates that the firm’s plan is to bring in a number of relationship managers of mixed experience and seniority.
Noah (China) Holdings was among a batch of four IFAs to be granted mutual fund distribution licences in China last month – the first for almost eight years.