Goldman Said to Plan Yuan Fund, Morgan Stanley Set to Follow
Goldman Sachs Group Chairman and CEO Lloyd C. Blankfein
Andrew Harrer/Bloomberg
Lloyd C. Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc.
Lloyd C. Blankfein, chairman and chief executive officer of Goldman Sachs Group Inc. Photographer: Andrew Harrer/Bloomberg
Goldman Sachs Group Inc. (GS) plans to set up a yuan-denominated private equity fund in China, according to two people with knowledge of the matter, while Morgan Stanley said it would announce a similar fund next week.
Chief Executive Officer Lloyd C. Blankfein attended a ceremony for Goldman Sachs in Beijing today, the people said, declining to be identified before an announcement. The bank and its Chinese partner will seek to raise 5 billion yuan ($769 million), another person said. Morgan Stanley plans to hold an event on May 18 to mark the start of its first yuan fund.
The U.S. banks would follow Blackstone Group LP (BX) and Carlyle Group in raising funds to compete with local rivals including Hony Capital Ltd. as China steps up efforts to develop its own buyout firms and strengthen capital markets. Private-equity investments in China jumped 40 percent to $19.7 billion last year, according to the Asian Venture Capital Journal.
“Regulatory-wise, it is still a bit cumbersome for the foreign players,” Johnson Chng, head of financial services at Bain & Co. in Shanghai, said by telephone today. For “some of the industries, the foreign names may be deemed to be too sensitive, such as in strategically important industries.”
Goldman Sachs will set up the Broad Street (Beijing) RMB Fund, its first single-country pool of investment capital, with Beijing State-Owned Capital Operation and Management Center, a person said. Richard Friedman, head of merchant banking for Goldman Sachs, was also at today’s ceremony, the person said.
Angela Yu, a Beijing-based spokeswoman for Goldman Sachs, declined to comment.
U.S. Limitations
Blackstone, the world’s largest private-equity manager, in 2009 became the first global buyout firm to announce plans for a local-currency fund in China, followed by TPG Inc. and Carlyle. The three firms have announced plans to raise a combined 20 billion yuan ($3.1 billion) for such funds.
Blankfein, who is approaching his fifth anniversary as Goldman Sachs’s chairman and CEO, is grappling with limits on proprietary trading and investments in hedge funds and private- equity funds imposed by the U.S.’s Dodd-Frank financial-overhaul law. The bank’s biggest businesses, trading and investing, are also the ones most affected by new global capital requirements.
In China, Asia’s biggest private-equity market over the past three years, foreign buyout firms are facing stiffer competition from local rivals as former executives at Goldman Sachs and Ping An Insurance (Group) Co. set up their own funds.
Local Rivals
CDB Capital, a unit of China Development Bank Corp., said in December it plans to raise about 60 billion yuan from domestic financial institutions for investment in private equity funds. China International Capital Corp., Citic Securities Co. and Haitong Securities Co. won approval to raise yuan- denominated funds for their private-equity units, the Securities Times said in February, citing an unidentified person.
Foreign private-equity investors face restrictions on buying assets in China, such as capital controls and limited access to industries designated by the government as strategically important.
Washington-based Carlyle Group, the world’s second-biggest private-equity firm, formed an investment management venture with Beijing State-owned Capital Operation and Management Center, it said in July.
Morgan Stanley (MS) and Hangzhou Industrial & Commercial Trust Co. plan to hold an opening ceremony next week for their private-equity venture in Hangzhou, according to an e-mailed invitation for the event that was confirmed by Noel Cheung, a spokeswoman for the New York-based bank. Hangzhou Industrial executives couldn’t immediately be reached for comment.
To contact the editors responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net; Shelley Smith at ssmith118@bloomberg.net
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