China property

Chinese fintech firm CreditEase to pioneer funds of funds as alternative to direct real estate purchases

CEO: high-net-worth individuals will turn to professionals for returns in future

PUBLISHED : Sunday, 26 November, 2017, 2:21pm
UPDATED : Sunday, 26 November, 2017, 10:59pm

CreditEase, one of China’s largest financial technology companies, has set its sights on funds of funds focusing on real estate projects as founder and chief executive Tang Ning anticipates a new property investment scenario.

The company will map out detailed operating guides to pursue fast growth in the funds of funds business by the end of this year, as it offers an investment alternative to high-net-worth individuals on the mainland, Tang said.

“Real estate investment has its width and depth,” he said. “In the next 10 to 20 years, individual property investors will shift from the DIY [do it yourself] model to partnering with professional organisations in chasing returns.”

At present, high-net-worth individuals in China seeking returns from property investment often directly buy and own residential or commercial units, betting on the appreciation of assets.

Most have struck it rich over the past two decades, benefiting from constant property price increases.

Tang, who studied economics in the United States before returning to set up Beijing-based CreditEase in 2006, said the market will break from a past when easy and quick money could be earned from buying properties.

CreditEase, which specialises in lending to small businesses and consumers as well as wealth management for affluent investors, plans to set up a clutch of funds of funds that will allocate capital to leading global real estate funds managed by big names such as Blackstone and KKR.

“The market potential is huge,” said Tang. “A small portion of the market can amount to a big sum of funds.”

Funds of funds offer a broad diversification and appropriate asset allocation. They are viewed as an investment tool that appeals to investors with low risk appetites.

‘Fund of funds’ seen as the saviours of China’s mutual fund sector

Yirendai, a subsidiary of CreditEase, became China’s first online consumer finance and wealth management company to list on the New York Stock Exchange in December 2015.

The funds of funds CreditEase raises will be invested in US dollar and yuan-denominated private equity funds focusing on the real estate sector.

Jon Ellis, founder and chief executive of online property marketplace Investorist, told the South China Morning Post last month that purchases by Chinese investors of overseas properties would continue to grow at an orderly and sustainable pace driven by plans for their children’s education abroad and an increasing demand for asset diversification.

CreditEase currently has six funds of funds under management worth a combined US$1.5 billion. They all target global markets.

Tang would not disclose the fundraising targets for the upcoming fund, adding that CreditEase aims to act as a pioneer in drawing a new investment landscape for property buying.

He also stressed the importance of technology such as big data and artificial intelligence to ward off risks and sift out the best-performing funds.