China millionaires in jeans spur wealth manager’s overseas push

CHINESE millionaires’ money overseas is backing a local wealth manager’s global expansion even as the government steps up controls on capital outflows.

US-listed Noah Holdings Ltd is planning to set up branches in Vancouver, Canada and Australia this year or early next year and looking into one in Singapore, says group president Kenny Lam in an interview in Shanghai.

Even as China clamps down on large overseas corporate acquisitions, Noah Holdings believes that the revenue earned by medium-sized companies outside China will support a substantial part of its overseas growth.

“When I joined Noah three years ago, I thought clients in second and third-tier cities had no demand for overseas investment,” says Lam, who had worked for 15 years at McKinsey & Co before Noah.

“Then my team brought me to a client meeting in one of those cities, where I met many low-profile entrepreneurs who wore T-shirts and jeans and couldn’t speak English. When they told me they had hundreds of millions of dollars overseas because of their businesses outside China, I was really surprised.”

China’s economic slowdown and property curbs have prompted rich investors to look abroad in a bid to diversify their investments. Concern about a crackdown on overseas investment has risen amid reports that Chinese regulators are stepping up scrutiny of top dealmakers such as HNA Group Co, Fosun International Ltd and Dalian Wanda Group Co, and asking banks to report their exposures to the companies.

“China is not telling entrepreneurs don’t do anything outside,” says Lam. “Instead, it’s delivering a message that there are a lot of big mergers and acquisitions and we should take a look and see whether they make sense.”

Noah, which focuses on high-networth investors in China’s second and third-tier cities such as Tangshan and Jiangyin, says the overseas assets it manages for customers may grow as much as 30% annually in the next three to four years. The firm, which manages US$3.5bil to US$4bil of assets abroad, started its first overseas branch in Hong Kong in 2012 and set up the US unit in 2016.

“A lot of customers have come to us, saying we have families in Vancouver and Australia and can you serve them,” says Lam.

Lam says the firm will choose between Melbourne and Sydney for the office in Australia. For overseas investment, Noah takes money that has already been earned outside China, not money from within the country.

An investment related to China Huishan Diary Holdings Co, whose shares suddenly plunged 85% on one single trading day in March, had dragged Noah into the spotlight earlier this year. One of Noah’s fund products invested about 500 million yuan (US$74mil) in client funds in account receivables related to Huishan, which missed payment around the end of March and is going through restructuring, according to Lam.

“We will never bail out any product,” says Lam. “We are always transparent with clients, telling them what risks they are taking and what products they are buying. But we can’t guarantee them the return.”

About 56% of high-networth investors surveyed had investments outside China, compared with 19% in 2011, according to a report released in June by China Merchants Bank Co and Bain & Co.

“Chinese globally are becoming a lot more active in investment,” says Lam. “They were usually recognised as investors of real estate, but they now want to do more.” — Bloomberg