ASIA NEWS: China’s bigger Harvest

By the end of the summer, PERE could be reporting more about one of China’s largest asset managers, Harvest Fund Management. That is because the firm is understood to be in negotiations with the real estate fund management arm of London-based property company Grosvenor to form a joint real estate investment management firm based and focused, initially at least, on greater China.

Further, it is understood that Rong Ren, the former chief executive officer of similarly-named but unrelated private equity real estate firm Harvest Capital Partners, is being lined up to lead the new platform. As PERE went to press, Ren was midway through his gardening leave period. However, that comes to an end in August, at which point Grosvenor and Harvest could announce the formation of the platform to the market.

Harvest Fund Management currently is something of an unknown quantity in private equity real estate circles at present, and a tie-up with Grosvenor would represent its formative steps investing directly into the asset class. For those unfamiliar, Harvest Fund Management is a 13-year-old asset management business that, as of 2010, managed approximately RMB200 billion (€24.99 billion; $31.4 billion) in assets. The firm manages many different styles of funds, including equity funds, hybrid funds, bond funds, money-market funds and closed-end funds, on behalf of more than eight million people, as well as institutional and some overseas investors.

A tie-up with Grosvenor would reflect Harvest Fund Management’s maiden foray into the world of real estate investing, although it is not unfamiliar with western organisations. Indeed, in 2005, Deutsche Bank acquired a 30 percent stake in the firm, and the two groups launched one of just a few Sino-foreign asset management businesses.

It is understood that the co-sponsored platform would leverage resources from both Harvest Fund Management and Grosvenor to invest in real estate in mainland China and that it could also become a conduit for domestic Chinese capital to access Grosvenor’s international real estate markets. In addition to Harvest’s extensive network in China, Grosvenor’s Grosvenor Fund Management division operates from locations across the globe. As of December 2011, the division managed almost $8 billion of assets across 28 funds, club deals and separate accounts on behalf of 69 investors.

As PERE went to press, the exact composition of the co-sponsored business had yet to be determined, including the level of autonomy Ren and his management team would enjoy. Ren resigned from Harvest Capital Partners in May following a difference of opinion with parent China Resources Group, the state-owned conglomerate, regarding the latter’s ambition to expand from its real estate focus to a multi-asset class private equity firm.

When contacted about the new venture last month, a Grosvenor spokesman said: “Grosvenor does not comment on market speculation.” Ren and Harvest were unavailable for comment.