China Renaissance founder Fan Bao goes missing

The announcement came within an hour of Caixin reporting the loss of contact and linking it to an investigation into Lin Cong, formerly chairman of Huaxing Securities, China Renaissance’s securities business. It is one of three core business units alongside private equity-focused Huaxing Growth Capital and an investment banking operation.

“The Board is not aware of any information that indicates that Mr. Bao’s unavailability is or might be related to the business and/or operations of the group which is continuing normally,” Hong Kong-listed China Renaissance said in a filing.

Last September, the Shanghai bureau of the China Securities Regulatory Commission (CSRC) said it was overseeing the implementation of changes at Huaxing Securities based on the “supervisory discussion” with Cong. It identified six problem areas, mainly involving conflicts of interest and deficiencies in risk management and internal controls.

China Renaissance was founded in 2005 and made its name as a financial advisor to the country’s unicorns. The partners then started to back some companies with their own money. This led to the creation of an investment management division and Huaxing Growth Capital, which launched its debut fund in 2013.

The investment management division had CNY 35.9bn (USD 5.2bn) in committed capital, including CNY 28.9bn in its main funds and the rest in project funds, as of June 2022. It had 10 active main funds as of December 2021: seven under Huaxing Growth Capital and three under Huaxing Healthcare Capital.

Last year, the firm achieved a CNY 3bn first close on its fourth renminbi-denominated fund. This followed a USD 800m second close on its fourth US dollar fund.

Investment management generated CNY 1.37bn in revenue and CNY 952.3m in operating profit in 2020, far outstripping the other divisions. These fell to CNY 910.5m and CNY 540.2m in 2021 - revenue slipped below that of investment banking but the division still led the way in terms of operating profit.

The decline in financial performance was primarily driven by a reduction in investment gains from China's Renaissance's positions in its own funds. This was tied to sharp sell-offs in listed Chinese technology stocks amid a government clampdown on the sector. It continued in 2020 as the sector suffered globally.

In a previous interview, Bao offered his take on China's regulatory upheavals. He views it in the context of the country shifting from the pursuit of growth and efficiency at nearly any cost to a model under which sustainability and social equity are prioritized. Fan concluded that investors must align themselves with these objectives to make the most of government-driven tailwinds.

China Renaissance’s response was to apply an environment, social governance (ESG) framework to its deals, an effort that began internally in 2020. While assessing environmental impact is relatively straightforward, Fan noted, issues such as social welfare are subject to broader interpretation.

China Renaissance has offices in Beijing, Shanghai, Hong Kong, Singapore and New York, with more than 700 employees globally.

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• Topics
• Greater China
• Regulation
• GPs
• China
• China Renaissance