Former CIC Exec Sets Up New China Fund
Just weeks after a group of seasoned managers launched a major new fund in Shanghai, word is out that another top money manager is preparing to launch yet another fund aimed at selling China companies to global investors. The man behind the latest fund-raising drive is Yu Bin, a former director from China Investment Corp (CIC), China’s sovereign wealth fund. Yu is part of a new generation of market-savvy Chinese fund managers to emerge over the last decade, often after returning from the west where they received both education and experience working for major global fund houses and investment banks.
All that said, CIC doesn’t exactly have the most stellar track record in terms of global investing, which means Yu might have to work hard to attract investors. The $575 billion fund posted returns of more than 8 percent last year on its global investments — far below the massive gains of 30-40 percent for S&P 500 and Nasdaq indexes. But Yu’s government connections should at least help to convince some investors that he has easy access to good investment opportunities in China.
According to the latest reports, Yu left CIC early this year for personal reasons, and will stay in Beijing to set up his new fund. (English article) The fund will focus on Greater China equities, and will mostly take long positions in its investments. There’s not much other detail beyond that, which implies the fund is still in its very early stages and probably won’t launch until next year at the earliest.
Yu’s profile certainly looks like that of many of the Chinese who are now striking out on their own to set up new funds. Most of those people are in their mid 30s to early 40s, and spent considerable time in the west and worked at western firms. Yu’s resume says he studied at Columbia and Brandeis universities in the US, and that he worked for a fund management company in New York and at US western consulting giant McKinsey & Co before joining CIC in 2009.
Word of Yu’s plan comes less than a month after another group of seasoned financial managers announced the formation of their own new fund with a hefty 50 billion yuan ($8 billion) in capital. (previous post) Many of the founders of that fund, China Minsheng Investment, came from Minsheng Bank (HKEx: 1988; Shanghai: 600016), China’s oldest and largest private bank.
Two of China’s other newly emerging money managers were in the headlines last week, when state-owned grains giant COFCO announced that it was selling strategic stakes in its meat processing arm to Boyu Capital and HOPU. (previous post) Other major Chinese private equity investors to emerge in recent years include Shanghai-based Fosun International (HKEx: 656), as well as Citic Capital, the investment arm of financial conglomerate Citic Group.
Each of these fund managers has its own strategy, though many are following a similar path of raising money from foreign investors and then putting a big portion of that into the China market. Yu looks like he will follow a similar strategy, most likely using his government connections to give him access to China’s domestic stock markets that are closed to most westerners.
As to the chances of success for Yu, or any of the others for that matter, we’ll have to wait and see some of their initial returns before we can say who will ultimately do well. The fund management industry is full of capable people, but few can post the consistent market-beating performances of investment gurus like Warren Buffett. I doubt that Yu will become the next Buffett, though perhaps his connections could give him access to information and attractive investments that are less accessible to average buyers.
Bottom line: A new fund being set up by a former CIC manager is part of a new generation of such funds for western investors, but is unlikely to yield market-beating returns.
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