China Renaissance looks for opportunities amid turbulence

“Without underestimating the challenges in the coming year arising from subdued economic activities against the 2019 novel coronavirus, which will likely slow down the revenue realization of investment banking projects, we have confidence in our ability to deal with such challenges,” China Renaissance said in its 2019 annual results statement.

The firm is best known for providing private placement and M&A advisory services to Chinese internet companies, but it has broadened in scope to offer brokerage, wealth management and investment management services. In the latter business, China Renaissance had nine primary funds and 17 project funds at the end of 2019. Committed capital and assets under management came to RMB25.1 billion and RMB34.2 billion, respectively – year-on-year increases of 19.1% and 21%.

Last year also marked the first time the firm had generated carried interest since entering the private equity space in 2013. It realized RMB42 million, with the more mature funds posting an average multiple of 2.1x.

During 2019, China Renaissance closed its third renminbi fund – raised under its Huaxing Growth Capital arm – with more than RMB6.5 billion in commitments. The predecessor vehicle closed at RMB5.4 billion in 2015. The firm’s third US dollar fund completed a first close in August 2018 and had total committed capital of $416.9 million as of June 2019.

Management fees increased 38.2% year-on-year to RMB433.8 million, while revenue rose 51.5% to RMB475.8 million. Operating expenses came to RMB284.4 million, a jump of 32.2%, largely driven by carried interest paid to staff and other parties as well as improved compensation and benefits packages. Unrealized carried interest stood at RMB461.4 million, of which RMB320.5 million is attributed to staff and other parties.

China Renaissance also made GP and LP commitments to its own funds of RMB42.2 million and RMB31.7 million, respectively, and invested RMB53.5 million in third-party funds as an LP.

The Hong Kong-listed firm generated overall revenue of RMB1.3 billion, down from RMB1.39 billion the previous year due to a sizeable drop in the investment banking contribution. Operating profit rose from RMB266.6 million to RMB336.1 million as substantial improvements in investment management and brokerage performance counterbalanced a decline in investment banking. China Renaissance posted a net profit of RMB310.3 million compared to a loss of RMB1.65 billion in 2018.

The firm credited the rising contribution from investment management fees for its operating profit stability. This increase came even though “private equity fundraising for the industry overall shrank by 34% year-on-year, affected by the new investment management rules, as well as macro uncertainties and difficulties exiting in a lukewarm secondary market,” it noted.

China Renaissance has previously said it wanted to achieve $10 billion in AUM within private equity by 2020, as well as raise more capital from foreign LPs.

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• Topics
• Greater China
• GPs
• Fundraising
• Renminbi fund
• Growth
• China
• China Renaissance