Morgan Stanley Will Launch Yuan-based PE Fund

Morgan Stanley will partner with government of Hangzhou, China, to launch a yuan-denominated private equity fund, Reuters reported. The Wall Street bank signed a partnership agreement with the city, but has not released fundraising targets. Morgan Stanley is following in the footsteps of buyout shops Warburg Pincus and Kohlberg Kravis Roberts & Co., which announced recently plans to set up private equity units in Shanghai.

(Reuters) – Wall Street bank Morgan Stanley joins global buyout firms such as Blackstone Group and the Carlyle Group [CYL.UL] in a rush to tap China’s booming private equity market, as it partners with the eastern city of Hangzhou to launch yuan-denominated private equity funds.

Morgan Stanley has signed a partnership agreement with the local government and has decided to establish in the city its China headquarters for private equity investment, the Hangzhou government said on its website, without saying how much money they planned to raise.

Earlier this week, Chinese media reported that U.S. private equity giants Warburg Pincus [WP.UL] and Kohlberg Kravis Roberts & Co will set up units in Shanghai to launch yuan funds, following in the footsteps of Blackstone, Carlyle and Bain Capital.

China is encouraging the development of the private equity industry, hoping to channel more liquidity into the private sector to aid economic growth. Beijing also expects to use foreign expertise to improve corporate governance.

“We hope that the partnership with Morgan Stanley would help boost private sector investment, accelerate economic restructuring and boost the local private equity industry,” the Hangzhou government said in a statement.

Previously, Morgan Stanley had invested in a trust investment firm in Hangzhou.
By Samuel Shen and Jacqueline Wong