Value Partners Group Ltd., a Hong Kong-listed money management boutique with close to $17 billion in assets under management, is moving to further diversify its long-standing focus on Greater China equities with a range of private markets capabilities.
The focus on new lockup-structure vehicles is being pursued, in part, to make the "once-in-a-lifetime" opportunity company executives say they're anticipating in coming years from China's integration into global investment portfolios a less volatile one for the firm.
Au King Lun, Value Partners' Hong Kong-based CEO since late 2016, said by early next year the firm will launch a 5 billion renminbi ($728 million) private equity fund focused on China's budding for-profit higher education sector and a $500 million private debt strategy.
Both strategies — with multiyear lockups — should offer attractive solutions for clients while helping alleviate the "huge mark-to-market risk" of Value Partners' more than $10 billion book of Greater China equities business, Mr. Au said in an Oct. 8 interview.
The private markets push underway now counts as a second round of diversification for the 25-year-old firm. After 15 years focused on Greater China equities, the firm began building a fixed-income business in 2009, led now by Gordon Ip. The Greater China High Yield Income Fund that Mr. Ip's team launched in 2012 has become a growth engine for the firm. Net inflows of $1.6 billion for the first half of 2018 made the fund — at $5.4 billion — Value Partners' biggest, lifting the fixed-income business to 35% of total AUM from 30% at the end of 2017.
Mr. Au said the experience Mr. Ip's team gleaned by investing a small portion of the income fund in private debt over the years laid the groundwork for the coming launch of Value Partners' first dedicated private debt strategy.
Meanwhile, Value Partners Private Equity Investment (Shenzhen) Ltd., a wholly foreign-owned enterprise the firm launched earlier this year, teamed up in July with China Education Group Holdings, the third-largest Hong Kong-listed education company by market capitalization, to manage the 5 billion renminbi fund.
Separately, Value Partners will follow up an initial real estate private equity fund the firm launched last year with a second fund early next year. Seed capital from the firm accounted for more than half of the first fund's $170 million in AUM, but the second will target "several hundred million dollars" in client money, he said.
While negligible at present, "we would like to have a significant part of our AUM coming from alternatives in five years' time," Mr. Au said.