China Real Estate Fund Pivots to Outbound Investment as Market Turns

At least one investment firm has made its position clear on where money is headed this year, and according to fund manager Harvest Real Estate Investment that direction is out of China.

According to a story in the Wall Street Journal, the fund manager, which also goes by its acronym HREI, has closed down its operations channelling overseas investment into Chinese assets and taken a 180-degree turn. The move includes the cancellation of the company’s planned $500 million HREI China Total Return Fund.

Formed in 2012 as a joint venture between Harvest Fund Management from Beijing and Grosvenor Fund Management of Beijing, the fund manager, which once handled RMB 2.8 billion ($448 million) in capital will reportedly be turning its focus to the opportunities available to China’s wave of outbound investors.

According to a news agency report citing an informed source, Rong Ren, who headed HREI since it was founded, has agreed to leave the firm.

Foreigners Coming in as Chinese Head Overseas

A number of international private equity firms including KKR, Mapletree and Gaw Capital raised record levels of funds last year to invest China property market, however, the sector has since run into headwinds during 2014.

Notable investors such as Li Ka-shing have been divesting of their China assets out of perception that the market is overvalued, while outbound investments by Chinese companies have dominated the headlines.

Besides regional investors such as Li, local Chinese giants such as Shanghai’s Greenland Group and Fosun have picked up a few dozen projects in a number of markets over the last 18 months.

In Greenland’s case the state-run enterprise has acquired 13 early stage development projects in 11 cities across eight countries within the last eighteen months. Fosun has been almost as active as it is reported to have taken on a $1.26 billion site in Greece late last month, and in October last year purchased One Chase Manhattan Plaza in New York for $725 million.

Earlier in 2013, the investment conglomerate (which also owns leading Chinese developer Forte) acquired France’s Club Med resorts together with French insurer AXA for a reported $700 million.