Warburg Pincus launches a wealth management company in China to target distressed opportunities in the country’s highly indebted real estate sector.
The U.S. private equity firm said Monday that it and Wensheng, a Chinese wealth manager, have jointly invested $ 600 million in a partnership that aims to build as much as $ 5 billion in assets under management. next half decade.
It is the latest example of large American banks and investors forging deeper bonds in China’s financial industry, despite the heavy geopolitical fund between the two countries.
It also comes when Beijing began to squeeze the country out vast real estate sector, imposing leverage restrictions on its largest developers and limits on mortgage lending by banks.
“In light of the ongoing financial reform in China and continued regulatory development, the real estate special situations sector is entering an accelerated growth trajectory,” said Qiqi Zhang, CEO of Warburg Pincus.
China’s troubled debt sector has been under the spotlight in international markets this year later. Huarong, the state-backed distressed debt manager that has $ 22 billion in denominated debt, has failed to release its March annual report.
The delay has raised questions about its Rmb1.7tn ($ 260 billion) balance sheet after the January execution of its former presidency for financial crimes, and sparked wild fluctuations in its bonds following the trading of its shares has been interrupted.
Warburg Pincus was an investor in Huarong prior to its initial 2015 public offering in Hong Kong, and still has an 8% stake. Across Asia, it has invested $ 6 billion in real estate since 2005.
China’s rapid economic recovery has raised concerns about prices in its real estate sector. The government’s so-called “three red lines” policy, which was initially signaled last summer, requires developers to abide by budget metrics designed to control their lending.
Evergrande, the country’s most indebted developer, has seen its stock price drop 33 percent so far this year and has launched a series of asset sales. In March, said it had reduced total interest debt by nearly a quarter to $ 103 billion.
Other American private equity firms are also active in the Chinese real estate sector. In June, Blackstone announced that he had hit one $ 3 billion deal for Soho China, an office developer. Earlier this year, it acquired an urban logistics park in southern China for $ 1.1 billion.
Other recent U.S. joint ventures include a Goldman Sachs partnership with ICBC, the state-owned bank, which was unveiled in May.