Nomura AM’s China JV tipped to spark trend

The Japanese asset manager has set up a private equity joint venture, which may stimulate competition between Shenzhen and Shanghai and herald more such deals, said Z-Ben Advisors.
Nomura AM’s China JV tipped to spark trend

While Chinese mutual fund joint ventures seem to be losing their lustre – with both BNY Mellon and State Street Global Advisors seen exiting theirs – private fund JVs look to be a rising trend.

Japan’s Nomura Asset Management has set up a 50/50 joint venture with Shenzhen Hua Xia Ren He Capital Management to conduct private fund business in the Qianhai economic zone in Shenzhen.

The city has granted a licence to the JV to sponsor and manage a qualified foreign limited partner (QFLP) fund. QFLP funds allow non-resident investors to invest in private-equity and venture-capital funds domiciled in China.

The firm’s move will probably stimulate competition between Shanghai and Shenzhen, said Zhang Howhow, director of research at Shanghai-based consultancy Z-Ben Advisors. He expects to see more such agreements.

“It’s good that a global firm like Nomura has thrown its weight behind the QFLP programme, and good news for Qianhai,” he added.

The JV will be headed by Jin Weichun, president of Hua Xia Ren He Capital, and will have four board members, appointed on a 50/50 basis.

Jin was formerly head of the private equity division of mainland property-and-casualty insurer PICC. He has also held senior positions at PICC Asset Management. Before that, he worked at the PE arm of Guotai Junan Securities.   

A Nomura spokeswoman declined to provide any other names. "Key members from Shenzhen Hua Xia Ren He are well known within the industry, with impressive track records and experience," she said.

She also declined to reveal the initial number of staff: "The entity will start with a minimal number of employees, but will increase headcount as the business grows."

The JV will target high-net-worth and institutional investors in China and provide investment strategies to foreign investors through the QFLP framework. It has Rmb13 million ($2 million) in capital.

Nomura AM sees the JV as a key entry point into the growing Chinese market and aims to enhance its presence and develop new businesses in the country.

The QFLP programme was launched in 2011 in Shanghai then replicated across the country. A few firms entered the scheme around that time, noted Zhang. But interest has fallen in the past two years or so due to the shutdown of China’s IPO market removing one common method for exiting PE investments, he said.

Another option for Nomura would have been to create a wholly foreign-owned entity (WFOE) and engage Ren He Capital on a contractual basis, he noted, but it may be that creating a local JV is one of the conditions to register in Qianhai.

Hong Kong's Value Partners is one firm that has set up a WFOE in China that it is busy seeking to build out, and it also have a mainland JV, Value Partners Goldstate Fund Management. 

Nomura AM already invests in mainland securities via its $350 million in qualified foreign institutional investor (QFII) quota.

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