OCTOBER 8, 2008, 5:06 A.M. ET Bohai May Tap China Life Official for CEO Post
By RICK CAREWArticle
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HONG KONG -- A senior official at China Life Insurance Co. is the leading candidate to become chief executive of China's highest-profile domestic private-equity fund, according to people familiar with the matter.
If an agreement is reached, Liu Lefei, currently China Life's chief investment officer, would succeed Au Ngai as CEO of Bohai Industrial Investment Fund Management Co., these people said. One of these people said a formal agreement hasn't been reached and that Bohai's board has yet to vote on the appointment. A China Life spokeswoman declined to comment.
The investment-banking arm of Bank of China Ltd. set up the Bohai Fund in 2006 to create a model for the growth of a domestic private-equity industry. To date, overseas firms like Carlyle Group and TPG have dominated the country's private-equity scene. The Bohai Fund raised local currency from a range of state institutions including China Life and hired Mr. Au away from TPG to put that capital to work. So far, the Bohai Fund has invested nearly one-third of the 6.1 billion yuan ($892 million) it raised.
China is keen to build a domestic private-equity industry to limit inflows of foreign capital and keep control of local companies in Chinese hands. Private-equity remains a tiny fraction of overall fundraising in China, which is dominated by initial public offerings. The efforts so far have hit some stumbling blocks as government officials debate how to regulate the industry and conflicting agendas prevent new funds from raising cash from big institutional investors domestically.
The politically connected Mr. Liu, born in 1973, has served as China Life's investment chief since July 2006 and was responsible for negotiating a number of key investments made by the country's largest life insurer by premiums. Its investment in Visa Inc.'s initial public offering marked a rare overseas financial investment made by China that has performed well.
He also has participated in a number of important deals including buying 20% of Guangdong Development Bank as part of a consortium led by Citigroup Inc. Mr. Liu represents China Life on the bank's board. Prior to his tenure at China Life, Mr. Liu has worked for a local Chinese securities firm among other ventures.
The Bohai Fund's previous CEO, Mr. Ngai, resigned in July from the fund and a number of other more junior staff have left. It is unclear what Mr. Ngai's next venture will be.
Write to Rick Carew at rick.carew@wsj.com
Showing posts with label private equity. Show all posts
Showing posts with label private equity. Show all posts
Thursday, October 9, 2008
Sunday, September 21, 2008
Hedge funds vs Private Equity Funds
http://ftalphaville.ft.com/blog/2007/07/09/5757/relative-values-private-equity-vs-hedge-funds/
Relative values: private equity vs hedge funds
Hedge funds and private equity have one big thing in common, says Lex. Both charge whopping fees — typically 2 per cent of assets under management and 20 per cent of investment profits. Otherwise, the differences are huge.
So which of the two asset classes is more valuable when a management company goes public? The obvious answer, according to Lex, is private equity:
First, its assets are tied up long-term. KKR, which plans an IPO, says 73 per cent of its assets are committed for as much as 18 years. While KKR is highly unlikely to hold any investment for that long, it does give huge flexibility to ride out tough times. And it provides a steady stream of cash from the 2 per cent management fee — alongside the bigger and more volatile 20 per cent share of investment gains.
Private equity funds can also juice fees with a charge for each deal and sometimes a cut for syndicating equity to third-party investors, which can take underlying management fees closer to 3 per cent, Lex notes.
By contrast, hedge fund investors can pull their money quickly if performance is bad, making the underlying fee stream less secure. In addition, poor investment returns can quickly inflict a double whammy on a hedge fund manager’s earnings — of weak performance fees and falling AUM as investors withdraw money.
Second, there is image. Private equity firms “feel more solid”, notes Lex:
They have established brands such as Blackstone and KKR, they buy full control of businesses people know, and buy-outs have largely avoided financial trouble in recent years. Hedge funds, for some, conjure up images of whizz-kids rolling the dice on behalf of clients, leading to high-profile blow-ups such as Amaranth and recently some mortgage funds at Bear Stearns.
Finally, private equity firms have a “cookie jar” of unrealised gains on their illiquid investments that should emerge as cash flow when the businesses are sold. (At least, that is the case in today’s strong market.)
But … dig a little deeper and hedge funds also have their charms.
They mostly lack the protection of long lock-ups. But in good times their AUM grows naturally because, unlike private equity, they do not constantly hand cash back to investors when they exit investments.
In the end though, both models live and die by their returns.
Fortress and Blackstone have a mix of other assets alongside their straight private equity funds. The coming IPOs of Och-Ziff, a pure hedge fund, and KKR, a fairly pure private equity manager, should give a clearer idea of relative valuations. Assuming hedge funds do not lengthen lock-ups significantly, “private equity should usually command a higher multiple”, says Lex.
However, investors also need to take cycles into account, it cautions:
The easy credit conditions that have fuelled the private equity boom are showing signs of strain and stocks are well into a long bull market. The flexibility of hedge funds to go short and mix up the assets they invest in might make the most blue chip managers look attractive in tougher times.
This entry was posted by Gwen Robinson on Monday, July 9th, 2007 at 10:38 and is filed under Capital markets, Private equity, Hedge funds. Tagged with blackstone, fortress, kkr, och-ziff. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
Relative values: private equity vs hedge funds
Hedge funds and private equity have one big thing in common, says Lex. Both charge whopping fees — typically 2 per cent of assets under management and 20 per cent of investment profits. Otherwise, the differences are huge.
So which of the two asset classes is more valuable when a management company goes public? The obvious answer, according to Lex, is private equity:
First, its assets are tied up long-term. KKR, which plans an IPO, says 73 per cent of its assets are committed for as much as 18 years. While KKR is highly unlikely to hold any investment for that long, it does give huge flexibility to ride out tough times. And it provides a steady stream of cash from the 2 per cent management fee — alongside the bigger and more volatile 20 per cent share of investment gains.
Private equity funds can also juice fees with a charge for each deal and sometimes a cut for syndicating equity to third-party investors, which can take underlying management fees closer to 3 per cent, Lex notes.
By contrast, hedge fund investors can pull their money quickly if performance is bad, making the underlying fee stream less secure. In addition, poor investment returns can quickly inflict a double whammy on a hedge fund manager’s earnings — of weak performance fees and falling AUM as investors withdraw money.
Second, there is image. Private equity firms “feel more solid”, notes Lex:
They have established brands such as Blackstone and KKR, they buy full control of businesses people know, and buy-outs have largely avoided financial trouble in recent years. Hedge funds, for some, conjure up images of whizz-kids rolling the dice on behalf of clients, leading to high-profile blow-ups such as Amaranth and recently some mortgage funds at Bear Stearns.
Finally, private equity firms have a “cookie jar” of unrealised gains on their illiquid investments that should emerge as cash flow when the businesses are sold. (At least, that is the case in today’s strong market.)
But … dig a little deeper and hedge funds also have their charms.
They mostly lack the protection of long lock-ups. But in good times their AUM grows naturally because, unlike private equity, they do not constantly hand cash back to investors when they exit investments.
In the end though, both models live and die by their returns.
Fortress and Blackstone have a mix of other assets alongside their straight private equity funds. The coming IPOs of Och-Ziff, a pure hedge fund, and KKR, a fairly pure private equity manager, should give a clearer idea of relative valuations. Assuming hedge funds do not lengthen lock-ups significantly, “private equity should usually command a higher multiple”, says Lex.
However, investors also need to take cycles into account, it cautions:
The easy credit conditions that have fuelled the private equity boom are showing signs of strain and stocks are well into a long bull market. The flexibility of hedge funds to go short and mix up the assets they invest in might make the most blue chip managers look attractive in tougher times.
This entry was posted by Gwen Robinson on Monday, July 9th, 2007 at 10:38 and is filed under Capital markets, Private equity, Hedge funds. Tagged with blackstone, fortress, kkr, och-ziff. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
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