ASIA NEWS: Offering what he wanted

You would be hard pressed to find an individual with a greater understanding of what the world’s largest institutional investors want than Collin Lau, the recently departed global head of real estate at China’s sovereign wealth fund, China Investment Corporation (CIC). Evidently, he thinks so too.

Lau left CIC at the end of May, relocated from Beijing back to his home city of Hong Kong and formed Bei Capital, an alternative assets investment management firm with a view to investing such institutional capital. Indeed, some pretty large institutions are thought to have backed his efforts already. Lau was unavailable for comment, but PERE understands his firm has attracted approximately $1 billion from institutions of a similar ilk, though not including CIC.

Bei Capital is a work in progress. At press time, Lau had appointed seven of the 15 staff he is understood to want and is expected to fill out his squad over the coming six months. That has not stopped the start-up from completing its first transaction, believed to be a real estate investment in greater China. The firm is expected to make equity outlays of between $150 million and $200 million each and to put approximately $500 million to work over the same timeframe.

Bei Capital’s first investments are anticipated to be in real estate across the Asia-Pacific region. After, the firm is expected to expand into other alternative asset classes, including private equity and infrastructure, in what would be something of a return to the wider brief Lau enjoyed when working at New York-based financial services and investment firm Starr International. He left Starr to become CIC’s first global head of real estate in 2009.

Of particular interest to market observers is how Bei Capital is structuring the capital it attracts. In a departure from closed-ended commingled funds – the traditional model of private real estate managers – Lau has created an evergreen enterprise vehicle that can be further capitalised periodically. With a view to aligning the interests of the firm with those of its investors, Bei Capital will pursue investments for long-term recurring income (that would need to be managed beyond the life of traditional fund products). Accordingly, Lau and his team will be incentivised periodically as well and not via a shorter-term carried interest structure.

As PERE interviewed Lau in July 2011, when he still was in charge of CIC’s real estate activities, he said the state fund wanted to participate in investments that offered it “optionality” on exits. Now that he has switched from investor to principal, he is offering that very thing, and certain investors similar to his old employer have backed him.