Q&A: Noah Holdings' Piau-Voon Wang

Q: What does your recruitment mean for Noah's operations in Hong Kong?

A: The offshore operation was established in 2012, so this is a continuation of an established strategy, strengthening the investment capabilities in Hong Kong. Any investment outside of China will be done from Hong Kong. The business will be driven by high net worth clients to begin with, but Noah is establishing an institutional primary business and already has some clients in China.

Q: How did the Noah evolve from being purely domestic in targeting the international market as well?

The only way you can unearth small and mid-market funds is by having people on the ground, there is no short cut

A: The renminbi funds business has seen its ups and downs, but it is clearly the mainstream now. While US dollar funds have a role to play, the predominant currency of choice for doing deals in China is renminbi, and rightfully so. Noah started 12 years ago so it has grown up with the local private equity industry. Several years ago clients started developing an appetite for investing offshore because they had built up experience of the asset class in China but they didn't want to invest in China only. Noah started offering some offshore products and it's still mainly the usual suspects, the big flagship funds. We are not going to introduce clients to start-up funds right away, it has to be safer, more stable brand names now.

Q: What kind of access do you have to international funds?

A: One of the attractions for me was that Noah has no access issues when it comes to the brand name firms. The largest GPs have figured out it is important to establish a China distribution strategy, and among the various wealth management groups, Noah is deemed to be their first choice. We have all the necessary licenses in Hong Kong, which are very transparent. What I think we need to develop further is the second tier, the smaller names that may not be as aware of the strategic importance of the Chinese distribution channel.

Q: How will Noah build up that exposure in the second tier?

A: The only way you can unearth small and mid-market funds is by having people on the ground, there is no short cut. We can invest in the big guys out of Hong Kong because they are going all over the world fundraising, but if we want to access smaller managers, and get into secondary and co-investment we have to be on the ground, studying various options. The US and Europe could be the initial areas of focus where we could hire people directly. Our group president is leading that effort to explore the possibility of expanding Noah's footprints to the US or European countries.

Q: Once Noah has established a relationship with an offshore fund manager, in what ways can clients get exposure to the fund?

A: Noah is a distribution business and then there is Gopher Asset Management, the subsidiary in which the fund-of-funds business sits. [Wang is a partner at Gopher in addition to being co-CIO of Noah's international arm]. When we look at a fund, it could go into the fund-of-funds and it could also go into the Noah distribution network as a single fund, so clients can choose how they want to have exposure. The international side is much less developed than Gopher's onshore business, but we are going down the same path - starting with flagship fund-of-funds and then broadening the offering to include thematic fund-of-funds, secondaries and co-investment.

Q: There is a widely-held belief that the traditional fund-of-funds model has no future globally. Is it any different in a China context?

A: When I joined the industry in 1999 there was only a handful of fund-of-funds worldwide. You needed a layer like that because of the information asymmetry: private equity as an asset class is only transparent to its stakeholders; information is not freely available to the public and rightly so. The middleman could be a fund-of-funds, with full discretion, or it could be an advisor. Over the last 20 years private equity has become increasingly mainstream as an asset class. It is a bigger part of investors' portfolios and so information is more readily available. When that asymmetry goes away, people ask why they need a fund-of-funds when they could do it themselves. China is a totally new fundraising channel, so the asymmetry still exists. While some groups have been investing actively within China, there is a bridge between understanding the asset class domestically and understanding it globally. It is one of few white spaces left in the asset management industry and probably the biggest opportunity for private equity over the next 10 years. Clearly the industry will evolve into customized accounts, co-investment and direct investment over time, but the best entry point at the moment in my view is fund-of-funds.

Q: How does Noah's approach to clients in China differ from that of international firms?

A: International firms have the advantage of being global organizations with longer histories and thus more established knowhow. Among the local players, the marketing and hand-holding is different, a lot tighter. The international firms can lean on the resources of local firms to get that understanding and in return provide brand names and resources overseas. What I hope to establish in Noah could be the best of both worlds. We have the resources on the ground - we can do the hand-holding, solve the regulatory issues, we have all the necessary licenses. At the same time I also hope to establish credible teams with international track records.

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• Topics
• Greater China
• LPs
• Fund-of-funds
• Noah Holdings
• Piau Voon Wang