Befitting of a developing market, China is beginning to see start-up investment management firms offer funds that share similarly uncommon structures and characteristics.
One such firm is Long Hills Capital, which was formed in 2009 by former CarVal Investors executive David Dingmin Chang and executives from firms that include Aija Partners and CBRE Global Investors. T
he Hong Kong-based firm has brought to market its Long Hills China Retail Real Estate Fund with a structure similar to that of a vehicle launched by TAN-EU, another start-up, almost one year ago. Long Hills currently is marketing the fund to investors with a view towards raising between $200 million and $400 million in equity.
Similar to TAN-EU, Long Hills launched its fund with an established Chinese business – in this case, one of the country’s best-known retail conglomerates, Beijing Hualian Group (BHG). Having established a development pipeline of projects, each to be anchored by a BHG supermarket, Long Hills expects to garner institutional interest from groups, including fund of funds, to help pay for their development.
In another commonality with TAN-EU, Long Hills’ hybrid fund is expected to offer various decision-making powers to investors in terms of acquisitions and exits, a facet that notionally has grown in stature among institutional investors. This is particularly true in the face of recent poor performances by a number of blind-pool funds where the manager has sole discretion over investment decisions.
TAN-EU’s debut fund, SOTAN China Real Estate I, was an early example of a start-up manager ceding discretionary powers, and the firm’s approach worked in attracting $200 million from two institutional investors to go along with $200 million of capital from Shui On Construction and Materials (SOCAM), a company of another large Chinese conglomerate, Shui On Group. SOCAM, like BHG, offers its partner privileged access to its development projects.