CreditEase launches maiden $150m FoF

The Chinese microlending firm’s first offshore private equity real estate fund-of-funds has been fully invested in funds launched by KKR and Pamfleet among others.  

CreditEase, a Beijing-headquartered peer-to-peer lending firm, has launched its first offshore private equity real estate vehicle as its first step towards establishing an overseas real estate portfolio.

The firm, via its wealth management arm, has set up CreditEase Global Real Estate Investments Fund I, a vehicle structured as a fund-of-funds. PERE understands that a fundraising target of $150 million has been set for the vehicle via which the firm is targeting opportunistic returns in the high teens.

Two closes have so far been reached on the fund, with the capital mainly raised from Chinese institutional investors and high-net-worth investors. The second closing was held in the last week of July, however CreditEase declined to disclose the amount raised.

CreditEase has committed the entire fundraising target to be invested in four real estate funds. Among these is Pamfleet Real Estate Fund II, the $400 million value-add vehicle launched last year by the Hong Kong and Singapore-focused private equity real estate firm Pamfleet Group; DLJ Real Estate Capital Partners V (China), the fifth real estate vehicle launched by the York-based private equity real estate firm DLJ Real Estate Capital Partners early last year for which the firm has reportedly raised over $200 million so far; and a European real estate fund of the New York-headquartered private equity real estate firm Kohlberg Kravis Roberts, the full details of which could not be confirmed by PERE.

Peng Zhang, head of real estate for CreditEase Wealth Management, told PERE that the firm is relying on some of the best fund managers in the world for its foray into the overseas real estate markets since it does not have the local expertise yet to directly buy a building in places like New York or London. He said that the next step would be to look at co-investment deals, following which the firm may opt for direct investments.

“During the last year, we have established a team and infrastructure. We will expand and enhance the capabilities in the next two to three years while we take a second and third step,” said Zhang.

Paul Hastings assisted the firm in the fund formation as well as in the formation of feeder funds which have been established in the Shanghai Free Trade Zone, a trading platform through which Chinese investors can invest into foreign assets using RMB currency.

Wayne Ma, partner at Paul Hastings, said the fund is among the first of its type in the Free Trade Zone. “The conversion of RMB into foreign currency is restricted, but the government is trying to simplify the approval process via the free trade zones. This fund is a way for HNIs, who only have RMB, to invest in overseas markets via the feeder funds. These PRC feeder funds would then be able to convert into US dollars and invest in the offshore fund.”

CreditEase Wealth Management set up an office in Singapore in October last year to drive its overseas investment strategy.

Currently, the team has a total of seven people, all of whom are focusing on real estate investments.