EBA Asset Management reaps rewards of management overhaul

EBA Asset Management, the real estate investment arm of China Everbright, outperformed the market because it chose to focus on a complete overhaul of management culture rather than the traditional mathematical methods used by equity funds, its vice president said.

A mechanism designed to motivate project managers by aligning their personal interests with the success of a project also helped the fund to deliver fat returns for investors in China’s commercial property industry, a sector whose glut of supply has kept many overseas investors at bay.

“Mathematical method in many cases failed to capture the potential of a project,” said EBA vice-president Zhou Songming, referring to the calculations a typical property equity fund makes when deciding whether to invest in a project or not.

EBA has targeted markets that have either strong economic fundamentals, like those in first-tier cities, or robust consumer cultures such as Chongqing, Chengdu, Wuhan and Changsha.

Zhou said: “Of course we look at the basic metrics such as GDP, population density, per capita income, and project-specific metrics such as the scale and surrounding competitors. The decisions are made on various factors, not one. For example most of the projects in Chengdu are risky due to severe oversupply there, but some at particular locations are doable.”

Of all their projects, the Chongqing IMIX Park retail mall best illustrates EBA’s approach and how a change of management teamcan make a real difference to a shopping mall.