Schroders Capital to expand private equity operations in China

Schroders Capital is close to launching its first onshore private equity offering in China, as it looks to capitalise on the growing renminbi market.
Schroders Capital to expand private equity operations in China

Schroders Capital is expanding its private equity business setup in China to raise funds from domestic investors for its Rmb3 billion ($411.2 million) private equity funds, a senior executive told AsianInvestor.

The British asset manager aims to leverage its existing China private fund vehicle, Schroders Capital Private Fund Management (Shanghai), which a acquired qualified foreign limited partnership (QFLP) licence in early 2020, for raising the funds.

“That should be our top priority for the rest of the year,” said Rainer Ender, global head of private equity at Schroders Capital.

Rainer Ender,
Schroders Capital

Once the new structure is in place, Schroders will target Chinese backers across the spectrum, with a focus on insurance companies and wealth clients.

Ender didn't give an exact timeline, but said the fund house is "in the implementation of the final adjustment required to have this local offering possible for us”.

Schroders Capital's push comes as China unveiled regulations on private investment funds for the first time in early July.

Renminbi funds have significantly gained ground over the past few years, and the investment manager aims to capitalise on the growing opportunities in this space.

As of end-June, China’s private investment fund industry managed Rmb20.8 ($2.9 trillion) of assets, according to the Asset Management Association of China (AMAC).

The new business structure will expand Schroders' local product suite beyond public funds after the investment manager received regulatory approval in June to operate as a wholly foreign-owned public fund management company in mainland China.

Source: Schroders Capital, 2023

Schroders currently runs its US dollar funds and RMB funds in parallel in the onshore market, with the RMB portion growing from one-third to about half of its China exposure.

The RMB funds under management amount to Rmb3 billion.

“The last 1.5 years have seen a real slowdown of the US dollar fund market for private equity, while the RMB market has stayed pretty robust. So, we're very excited about our positioning to be a player on both sides,” he said.

Underneath the Schroders Capital Private Fund Management (Shanghai), a Luxembourg structure facilitates foreign capital investment into the RMB private equity market.

The new setup will be domiciled on the mainland and will enable onshore Chinese investors' access to the firm's RMB funds.

“It's two different business models and we will pursue both. We have a big international investor base, and we want to build the Chinese investor base domestically,” Ender said.

Schroders Capital has more than 20 private equity professionals in China across investments and operations. Ender signalled headcount may rise with additional local business lines.

Since the firm employs deploys funds across primary, secondary and co-investments in China, Ender said the priority will be to decide which product is launched first under the new structure before considering new hires. 

Schroders Capital set up its first dedicated Asian fund to invest across the region including China, back in 2005.

Each year the firm deploys about $2.5 billion into private equity globally, of which close to 20% goes to Asia.

Within Asia, China accounts for half of the investments. India comes second at north of 30% while the rest goes to Southeast Asia and developed Asia.

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