The following article is from The Edge Singapore – Published on Thu, Mar 11, 2021
Asset Management
Leading China-based asset manager Harvest Group is gearing up to expand its operations based out of Singapore, to meet growing clients’ appetite for investments outside China as part of their portfolio diversification.
“There’s plenty more room for Chinese capital to grow in markets outside China, thus we wish to expand the offshore application of our investment capabilities especially in Singapore,” says chairman Henry Zhao Xuejun.
The way he sees it, choosing Singapore as a hub of activities outside China is an easy decision to make. Due to the sound regulatory framework created by regulator the Monetary Authority of Singapore, the city-state has become a key wealth management centre.
“Naturally, we have to pay more attention to Singapore, and set up a bigger presence in Singapore and use this a base for our business activities in the region,” he says.
“We see Singapore as our new offshore centre for not only our current wealth management office in the region, but also a larger overseas business framework centered around alternative investments in Singapore, focusing on Fintech, private equity, and wealth management,” he adds.
The firm was founded in 1999. Zhao, who holds a doctorate in economics from Peking University, joined the firm a year later.
Under Zhao, who has built up a track record as the longest-serving head of a Chinese asset management firm, Harvest has grown its assets under management to around US$200 billion.
Harvest hires around 300 investment professionals, and the firm operates nearly a dozen offices located in the various key global financial centres.
Within China, it caters to clients of different market segments ranging from retail investors to high net-worth individuals, institutions and also sovereign wealth funds.
Harvest Group has three shareholders. China Credit Trust Co holds the biggest share of 40%, with Lixin Investment Co and DWS, formerly Deutsche Asset Management (Asia), holding another 30% each.
The funds managed by Harvest are invested in asset classes ranging from publicly-listed companies to private equities. If need be, it is happy to provide bespoke solutions for clients. For example, it has recently helped a client invest US$35 million to build a hotel in southeast Asia.
“With China’s growing affluence, there will be more interest to invest offshore, in locations such as Singapore. We can help them handpick quality assets for them to consider, and play the role of risk diversification in their portfolio,” says Andrew Tan, Singapore-based managing director of H Partners Financial Holdings, a subsidiary of Harvest Group.
According to Tan, 80% of the AUM booked by the Singapore office originates from China and 20% from outside China. With a low base and faster growth pace, he sees this proportion reaching 60% China and 40% non-China. From an AUM of US$300 million booked in Singapore now, Tan sees this number surging to US$1 billion.
The Singapore office is focused on serving institutions and family offices, and there are no plans to expand into the retail market, says Tan.
Proper Diversification
Now, as global economic and market trends go, China clearly leads in terms of growth rate, market size, market potential and even the pace at which new wealth is minted. Why would capital from within China want to go into unfamiliar ground outside the home market?
“China is able to grow at a pace faster than most economies, but all investors face the same problem: how to ensure proper diversification. They can’t put everything into one currency, one market, one sector,” explains Zhao.
To this end, Singapore has a key role to play as an offshore destination – be it for fund-raising, or a base from which investments are made.
Furthermore, Harvest sees both fund-raising and investment opportunities as a two-way street. “We also want to help investors in Singapore capture the structural opportunities in China with high growth potential, building a two-way bridge that connects Singapore and China,” says Zhao.
Harvest aims to widen its scope of activities and widen its network of partners and investors via the Singapore office. “We hope that with our regional office in Singapore, we can partner with other investors such as sovereign wealth funds, raising both RMB and USD, thus enabling us to continue to expand the methods through which we invest beyond China, into the US market, Hong Kong-listed China companies, as well as companies in Southeast Asia,” says Zhao.
He also believes Harvest has an edge in terms of the people it has. For many traditional wealth management firms, the key people in charge rise up the ranks by being relationship managers. In contrast, Tan’s background is in investing, as are the colleagues who joined him later in the Singapore office.
“As such, Andrew and the team are better able to provide very sound advice on investment decisions to our clients,” says Zhao.