For the past few years in China’s private real estate market, US investment managers have been working out ways to raise RMB capital from wealthy Chinese individuals and institutions. Meanwhile, Chinese investment managers have been looking to do the reverse: raise from US dollar-denominated institutions.
Terence Loh, an executive director at Hong Kong-based fund manager CDH Investments, explained at the PERE Summit Asia in Hong Kong, that the two currencies have different roles in China’s real estate market. RMB funds tend to be single-asset funds with a much shorter lifespan, for example.
“Chinese investors typically don’t like blind-pool funds because of the duration of the fund, plus the uncertainty of the investments,” Loh said. Foreign managers eyeing China’s cash-rich institutional and high net-worth investors will have some adjustments to make if they want to pursue such capital, he warned.
US dollar investors, on the other hand, may come with exchange rate challenges, for example, but it is longer-term and easier to fit into a blind-pool structure. Since the capital is “patient”, RMB fund managers find they can do different kinds of investments over several cycles of the market.
Loh predicted that RMB managers going for offshore monies would be an ongoing trend in China, but in order to be successful managers, would probably have to be more open about their corporate governance and methods than they are used to.