China Renaissance adds strategies, targets $10b in AUM by 2020
China Renaissance has added dedicated healthcare and mezzanine debt strategies to its existing growth-stage private equity offering as part of efforts to more than treble its assets under management (AUM) over the next three years.
The financial institution – best-known for providing private placement and M&A advisory services to Chinese internet companies – started making proprietary investments in the technology space and used that as the basis for an independent asset management business. It has $3 billion across US dollar and renminbi-denominated funds, with the latter accounting for about 70%. China Renaissance has now set a target AUM of $10 billion by 2020, with a larger proportion of capital expected to come from foreign LPs.
At present, 90% of AUM is contributed by Chinese investors, including fund-of-funds, family offices, financial institutions, corporates, and high net worth individuals. The plan is to increase the non-Chinese share to 30-40% of the enlarged target, with marketing efforts likely to focus on sovereign wealth funds, hedge funds and asset managers in North America, the Middle East, and the broader Asian region.
China Renaissance launched its first healthcare fund in late 2016 and the vehicle closed in September at $200 million. Most of the corpus has now been invested in two medical device manufacturers, a pharmaceutical company and a medical technology business, with early-stage biotechnology deals also expected to feature. The healthcare team is particularly interested in opportunities that involve consolidation or mergers and bolt-on acquisitions.
The mezzanine debt business is scheduled to begin operations in the first half of 2018. China Renaissance will launch a fund with a view to creating a portfolio comprising short-duration private loans, transaction financing, and mezzanine tranches of asset-backed securities negotiated directly with individual companies. It is expected to offer clients and portfolio companies an alternative financing option to equity.
Huaxing Growth Capital will remain the flagship arm of the firm’s asset management business. Two US dollar and two renminbi funds have been raised and closed since 2013, with total AUM of $2.86 billion. The operation has also evolved in scale to the point where Huaxing Growth is marking larger investments than before. It will now typically commit $20-70 million per deal as the lead or co-lead investor.
The remit is to back revenue-generating companies with products and services for which there is established market demand and the potential to achieve a valuation in excess of $1 billion. Business models are expected to feature technology innovation, industry transformation through automation or other advancements, and leverage the changes in scale and sophistication in Chinese consumer demand.
Huaxing Growth has invested nearly $210 million so far this year from its US dollar and renminbi vehicles. The largest investments include online real estate platform Lianjia, online steel-trading platform Zhaogang, and JD Finance, an internet-based financial services business that was spun off earlier this year by e-commerce player JD.com in a $2.1 billion deal.
“The maturation of China’s market – with disruption in both consumer and business-to-business verticals, abundant capital, and the vast scale at which innovations come to market – has created unique opportunities and challenges for entrepreneurs and investors. Our ability to navigate these conditions allows us to play a crucial role as a partner to China’s business visionaries and the investors providing the capital for their growth in partnership with our funds,” said Fan Bao (pictured), chairman and CEO of China Renaissance, in a statement.
In addition to asset management and deal advisory services, China Renaissance provides securities underwriting, research, sales and trading, and other financial services. It employs 600 people across offices in Beijing, Shanghai, Hong Kong and New York. Since its establishment in 2004, the firm has worked on more than 500 transactions with a cumulative value in excess of $90 billion.
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