Money

Morgan Stanley to launch yuan-based PE fund

By Samuel Shen and Kazunori Takada (China Daily)
Updated: 2011-05-20 13:55

HANGZHOU - Morgan Stanley aims to raise 1.5 billion yuan ($230 million) in its first yuan-denominated private equity fund in China.

The move will see the financial services company joining rivals such as the Carlyle Group and Blackstone Group in the hunt for a piece of the booming market.

The yuan-denominated fund, to be launched through Morgan Stanley's newly established Chinese yuan private equity unit, will focus on assets in the affluent province of Zhejiang, according to Morgan Stanley.

Related readings:  Yuan settlement in cross-border trade tops $82b  Carlyle makes first deal with RMB fund  Goldman sets yuan fund with Beijing gov't  Yuan-funds plan floated by regulator

"In line with our strategy to continue to expand our footprint in China, the new RMB private equity fund adds to a broad suite of financial services and products that Morgan Stanley offers to institutional and individual clients," Co-chief Executive Officer of Morgan Stanley Asia Pacific Wei Sun Christianson said in Hangzhou, Zhejiang province, where the fund will be based.

Global banks and buyout firms including Blackstone Groups, Carlyle Groups and TPG Capital are rushing to launch yuan funds in China, seeking easier access to investments as well as local investors.

Morgan Stanley will launch the new yuan-dominated fund through Morgan Stanley (China) Private Equity Investment Management Co, a joint venture with Hangzhou Industrial & Commercial Trust Co.

The US investment bank holds an 80 percent stake in the venture, with the remaining interest owned by Hangzhou Trust, in which Morgan Stanley bought a 19.9 percent stake in November 2008.

Last week, Goldman Sachs signed a partnership agreement with the local government of Beijing, aiming to raise up to 5 billion yuan for a yuan-denominated private equity fund in China, a source familiar with the matter told Reuters.

Many other foreign players, including TPG, Carlyle and First Eastern Investment Group, have unveiled similar fundraising plans, since Blackstone in 2009 became the first foreign private equity firm to launch a yuan-denominated fund in China.

Yuan funds allow foreign private equity firms to access deals more easily and face less regulatory scrutiny.

Previously, institutions such as Goldman Sachs and Carlyle Groups invested in Chinese companies through offshore dollar-denominated funds.

Morgan Stanley has been actively investing in Chinese companies for more than 18 years through its Asia private equity unit.

Companies in its portfolio include Ping An Insurance Group Co, Mengniu Dairy Co Ltd and Belle International Holdings Ltd.

Morgan Stanley entered the Chinese market in 1993 and has developed a diversified business platform that includes a wholly owned commercial bank, a mutual fund venture and a trust venture.

Morgan Stanley has also received regulatory approval to set up a securities venture in China, after selling its stake in China International Capital Corp late last year.

Reuters