China Merchants to broaden investment scope

State-owned group launches asset management subsidiary staffed by leading financial experts

State-owned conglomerate China Merchants Group on Monday unveiled a new asset management subsidiary that focuses on "alternative investment", or investment other than stocks, bonds and cash.

The new entity, China Merchants Capital, will be managed by a 100-strong team of star fund managers and financial experts, including former JP Morgan executive Zhang Tianwei, the fund's chief operating officer. Former financial secretary of Hong Kong Leung Kam-chung, who is now the chairman of Blackstone Group's Asian office, serves as non-executive vice-chairman and advises the board.

The company now manages 20 billion yuan ($3.21 billion) in assets and hopes to increase that figure to 100 billion yuan in five years, said Zhang.

At the moment, the company mainly focuses on private equity investments, but the range of its investment will broaden to cover fixed-income assets, infrastructure and commercial property, Fu Yuning, chairman of China Merchants Group, said at a news conference in Shenzhen. Fu also serves as China Merchants Capital's chairman and chief executive officer, underscoring the importance of the new subsidiary.

The company also seeks to participate in open market investments, including foreign exchange, commodities and structural financial products, Fu added.

Founded in 1872 during the Qing Dynasty (1644-1911), China Merchants Group played a pioneering role in China's economic reforms.

Shekou Industrial Zone in Shenzhen was established by China Merchants Group in 1979, shortly after the launch of China's reform and opening-up policy, and before the launch of the Shenzhen Special Economic Zone in 1980.

At the end of 2011, it had 342.3 billion yuan in total assets. Profits in 2011 reached 23.7 billion yuan.

China Merchants Group has broad experience in private equity investment. In 1987, the group launched China's first private equity company, China Kezhao Hi-tech Co Ltd, which remains one of the leaders in the nation's private equity industry.

China Merchants Capital will be in charge of all of the group's private equity investment operations. The group had previously made a number of successful private equity investments, including those in US-listed Focus Media Holding Ltd and Renren.com.

Fu said the launch of China Merchants Capital highlights the group's long-term strategy to focus more on asset management and create a synergy among the group's financial and real-economy businesses.

The new asset management company will work closely with the group's exiting core financial businesses, including lender China Merchants Bank Co Ltd and investment bank China Merchants Securities Co Ltd.

China Merchants Securities will provide the new companies with pre-IPO opportunities, while China Merchants Bank can link its private banking clients with the company, according to Fu.