BEIJING (Reuters) – Private equity firm Cerberus Capital Management CBS.UL is starting a new fund to invest in assets it thinks have been driven down too low by the credit crisis, Chairman John Snow told Reuters on Thursday.
The decision by Cerberus to wade more heavily into the market for distressed assets follows similar moves by a growing number of its rivals, including Apollo and Blackstone.
The Cerberus fund will focus on international assets, with only a small percentage likely to be devoted to the United States, Snow said. The former U.S. Treasury Secretary declined to give a target size for the fund.
“The valuations of a lot of financial institutions have them oversold, undervalued,” Snow said in an interview at a finance conference in Beijing. “For investors who don't have short-term liquidity requirements, who can wait a while, there will be significant returns.”
It could be two to three years before investors start reaping those gains, he said.
Despite earlier reports that New York-based Cerberus was looking at loan and property portfolios, Snow said the firm had been very cautious thus far.
“Cerberus has highly trained, experienced people in that world, and we haven't rushed in yet,” he said. “The impossible question is when do you get to the bottom of this. Nobody knows that.”
Snow declined to comment on whether he had met any Chinese officials or firms about investing in the distressed asset fund, but he did say Cerberus saw a role for itself in channeling Chinese cash abroad.
“Clearly, those large pools of wealth are looking for good returns,” he said. “Our funds are open, and we are prepared to talk to people who want to invest with us. We are not exclusive.”
He said he expected that investors from both sides of the Pacific Ocean would put up money for the new fund.
Chinese state agencies in recent months have invested in two foreign private equity funds; one set up by TPG Capital and the other by J.C Flowers & Co. And China's sovereign wealth fund took a $3 billion stake in Blackstone (BX.N: Quote, Profile, Research, Stock Buzz) before the private equity group's IPO last year.
Beijing has also been pushing the development of a domestic private equity industry, but its rule changes, such as promoting funds raised in yuan, have tilted the advantage toward local players and have frustrated foreign firms.
“We're prepared to take stakes (in China), but you have to play the ball where it lies,” Snow said.
Cerberus, established in 1992, stepped into the public spotlight last year when it bought the majority of struggling U.S. automaker Chrysler Group.
(Reporting by Simon Rabinovitch, editing by Will Waterman)