VP Group going solo into China
Hong Kong-listed asset manager ends talk with potential partner
HONG KONG: Asset manager Value Partners Group (VP) has decided to pursue its expansion into the Chinese mainland independently “for the foreseeable future” after stake-sale talks with a third party, reported to have been conglomerate HNA, were called off, China Daily reported.
VP co-founder and chairman Datuk Seri Cheah Cheng Hye said the Hong Kong-listed financial firm had sought a powerful mainland partner for its expansion. However, VP decided it could gain solid footprint in the economy on its own considering solid economic fundamentals and the deregulation by central government authorities.
“Starting from January 2018, we decided for the time being and in the foreseeable future, this company is not for sale and will remain an independent company,” the Penangborn Cheah said in an exclusive interview with China Daily.
HNA was in talks to purchase a VP stake last year, according to reports from several foreign media outlets. In May, 2017, VP said in a stock exchange filing that third parties had approached shareholders and the firm was in discussions with a potential bidder.
The potential transaction was later scrapped. In another filing in January, the fund house said it had ended talks with a “potential offeror” on selling a stake in the company “due to commercial considerations”.
VP, one of Asia’s biggest asset managers with US$17.9bil in assets under management, is a rarity among financial institutions in the region; its top shareholders are individuals rather than financial institutions.
Cheah and his partner V-Nee Yeh founded the firm in 1993. The two co-founders now hold more than 40% of the company, according to Bloomberg figures.
Cheah said talks with an external party were part of his overall review on the company’s strategic options.
The successful Hong Kong homegrown fund manager – a rarity – sig- nalled its ambition to double assets under management in three to five years, and move into the premier league, becoming a world-class asset manager. The United States and mainland markets are the primary targets in their global push.
Without naming the firm, Cheah said when the company was mulling a strategic stake sale, the mainland conglomerate “seems to have the ability to reach out to many Chinese customers”.
However, the continuing deregulation by authorities had cleared many of the barriers foreign asset managers had faced when seeking to grow in the mainland, he added.
In June 2016, authorities officially let global asset managers register as onshore private fund houses. Months later Fidelity Investment Management became the first wholly foreign-owned enterprises (WFOE) to receive a private fund management (PFM) licence. Fidelity launched its first onshore private fund in March last year.
VP obtained its PFM licence in January this year and went to work immediately. Its first PFM fund raised over 100 million yuan (HK$123.8mil). A substantial chunk of the initial fund raising was from high net-worth clients.
“It’s an excellent start for a new PFM licence,” said Cheah.
Betting on expanding private wealth in the mainland, along with strong demand for quality funds, Cheah plans to launch at least two PFM funds this year, with more to follow.
One of VP’s best-performing funds, Value Partners Classic Fund, with assets hand-picked by Cheah in 1993, had a return of 3,846.7% since its launch. VP applied for the fund to have Mutual Recognition of Funds status, a scheme announced in 2015 to let eligible mainland and Hong Kong funds be distributed in each other’s market through a streamlined vetting process. Cheah hopes the China Securities Regulatory Commission (CSRC) will approve the fund’s MRF application in the next 12 months.
VP’s Shenzhen subsidiary had obtained a qualified foreign limited partnership licence, which lets foreign institutional investors raise money both offshore and onshore to invest in domestic private-equity projects; Cheah said VP is also preparing to launch a private-equity business in Shenzhen.
“On the longer term, we hope Chinese regulators will deregulate and let us obtain a domestic asset management licence,” Cheah said, referring to foreign access for mutual funds on the mainland.
Under the current regulatory framework, any domestic private fund managers wishing to engage in public fund business may apply to the CSRC after satisfying certain qualification requirements such as minimum three-year business track record. However, WFOEs, with or without PFM licenses, cannot manufacture or distribute mutual fund products.
“As an independent brand, we will be even more attractive to people in mainland China,” he said. — China Daily