October 28, 2021

DealBook: A Toehold for China on Wall Street

The China Investment Federation opened a New York office in the Trump Building at 40 Wall St.Tina Fineberg for The New York TimesThe China Investment Federation opened a New York office in the Trump Building at 40 Wall St.

Shaolin-style martial arts. A plate-spinning acrobat. Musicians playing the dizi, a Chinese bamboo flute, and the yangqin, a hammered dulcimer.

That was the scene Thursday evening on the 52nd floor of the Trump Building at 40 Wall St. in Lower Manhattan, where the China Investment Federation, a new organization supporting Sino-American deal-making, celebrated the opening of its New York office.

The group, which started last summer in Beijing, aims to help Chinese investors overcome cultural, political and logistical hurdles to doing business in the United States. Sponsored by DKI Capital, a Beijing-based investment firm, the China Investment Federation now has a toehold in the symbolic center of American capitalism.

“We hope this office will be a place for the Chinese millionaire in New York,” Chris Li, the president of DKI, said in a speech on Thursday, comparing the opening of the office to the establishment of the New York Stock Exchange.

With the rise of China as a global power, investors there are looking for opportunities overseas. Increasingly, Chinese and American firms are doing business together, and United States investors are raising more money to do deals in China.

The importance of China to Wall Street underpinned the decision by Stephen A. Schwarzman, head of the Blackstone Group, to create a $300 million scholarship for study in the country.

Still, it can be challenging to navigate the differences between the two countries. Chinese investors are increasingly opting to buy stakes in overseas companies rather than buy them outright, in the face of political opposition, said Dajiang Guo, the chief executive of Citic Securities International USA.

“That’s a business reality we all need to face,” he said at the event on Thursday.

Part of the mission of the China Investment Federation is to bridge these disparate markets. Unlike the United States, China lacks “stratification of capital,” said Jay Riskind, managing director for global projects at DKI Capital. Investments there are “opportunistic,” he said.

“As we plant the flag on Wall Street, we consider this a meaningful moment for realizing the Chinese dream,” Mr. Riskind said.

Thursday’s event attracted a crowd from finance, law and real estate, who took in Chinese-style performances in the office space while enjoying cocktails and hors d’oeuvres. Waiters passed around trays of tea-smoked chicken on wonton crisps with saffron aioli; shredded Peking duck on scallion pancakes with plum hoisin sauce and julienne cucumbers; and filet of beef on rosemary dusted potato with white bean puree.

Richard Huang, secretary general of the China General Chamber of Commerce, was in attendance, as was Khalid Malik, director of the human development report office of the United Nations.

“I’m just stopping by,” said Jeff Huang, managing director for greater China at the IntercontinentalExchange. “I have a dinner appointment on Wall Street.”

The leader of the China Investment Federation, Yang Shengli, has a lavishly appointed office that was open for guests to explore, featuring tables made from Chinese redwood. The furniture, with a combined value estimated at more than $200,000, was shipped from China.

For symbolism, it seemed the China Investment Federation couldn’t do much better than an office on Wall Street inside a building named after the master of showmanship, Donald J. Trump.

“The whole Trump family is very excited to have them in the building,” said Steve Lafiosca, Mr. Trump’s director of commercial properties.

Article source: http://dealbook.nytimes.com/2013/05/17/a-toehold-for-china-on-wall-street/?partner=rss&emc=rss

DealBook: Blackstone Reports a Loss Amid Tough Markets

Stephen A. Schwarzman, the head of the Blackstone Group.Antoine Antoniol/Bloomberg NewsStephen A. Schwarzman, the head of the Blackstone Group.

The Blackstone Group said Thursday that it lost $341.9 million for its third quarter, wounded by market volatility and a tough environment for private equity firms to make money.

Blackstone’s results were driven by markdowns in the value of the firm’s private equity and real estate holdings. The loss was a sharp swing from a $339.3 million profit at the same time last year, and the firm reported negative revenue of $124.1 million as well.

On a generally accepted accounting principles basis, Blackstone reported a net loss of $274.6 million and negative revenue of $124.1 million for the quarter.

Still, the investment giant still managed to increase its assets under management 32 percent, to $158 billion.

“The third quarter presented extremely challenging market conditions, dominated by risk aversion and volatility,” Stephen A. Schwarzman, Blackstone’s chairman and chief executive, said in a statement.

As one of the biggest publicly traded private equity shops, Blackstone is often looked at as a proxy for other so-called alternative investment firms. The gyrations of the markets and the increasing reluctance of banks to lend money to riskier borrowers has made it difficult for these firms to carry out their core business of deal-making.

And a prolonged economic malaise is likely to hurt the value of their diverse holdings. Blackstone alone counts Hilton Worldwide, BankUnited of Florida and the software company SunGard among its portfolio companies.

Most of Blackstone’s core businesses — private equity, real estate and hedge funds — suffered in the quarter, hurt by declining performance fees and investment income. The firm’s buyout arm reported $285.1 million in negative revenue, while the enormous real estate division reported $15.2 million in negative revenue.

Its hedge fund of funds and its GSO debt-trading business reported significant declines in revenue for the quarter as well.

Blackstone’s financial advisory unit, which advises companies in mergers and in corporate reorganizations, reported flat revenue for the quarter at $87.4 million.

Still, should economic conditions improve, Blackstone has plenty of uninvested capital that it can deploy. The firm reported $16.9 billion in dry powder held by its private equity arm and $10.1 billion in its real estate unit.

Article source: http://feeds.nytimes.com/click.phdo?i=77c5e7c204f3fb9c6f6a26a4fbd9b1ae

DealBook: Russia Musters Its Credibility to Sell Fund

As part of its drive to show foreign investors that Russia is a safe and profitable place to put their money, a government-owned bank has established a private equity fund with a former Goldman Sachs banker in charge and Prime Minister Vladimir V. Putin as rainmaker.

Last month, Mr. Putin met in Moscow with prominent international investors including Stephen A. Schwarzman, chief executive of the Blackstone Group, and Lou Jiwei, chief executive of the China Investment Corporation, to try to generate interest in Russia’s direct investment fund. Mr. Putin plans to announce the fund formally later this month at the St. Petersburg International Economic Forum.

Over dinner on Wednesday in Vienna with a small group of business people and investors, Kirill Dmitriev, an alumnus of Goldman Sachs and McKinsey Company who is chief executive of the fund, gave details about how it would be structured.

The point of the fund, Mr. Dmitriev emphasized, will be to make money. That is not always obvious in Russia, where foreign investors have been concerned about corruption, lack of an impartial court system and the authoritarian tendencies of the government.

“We want to make some returns,” said Mr. Dmitriev, who speaks lightly accented, colloquial English and graduated from Stanford University and Harvard Business School. Before Mr. Putin named him to run the fund, Mr. Dmitriev was president of Icon Private Equity, a fund focused on Russia and the former Soviet Union.

Profitability, rather than government policy goals, will drive the investments, Mr. Dmitriev promised. While the overall aim is to promote growth and create jobs, investments will be judged according to the potential return over the typical private equity cycle of five to seven years, he said.

Russia plans to commit $10 billion to the fund, in installments of $2 billion a year for five years, via the government development bank Vnesheconombank. But the bank’s stake in investments will never exceed 50 percent, meaning that foreign investors will retain control, said Petr Fradkov, deputy chairman of the bank.

At the same time, Mr. Putin’s personal involvement in the fund is designed to reassure investors that they will not be abused by arbitrary or corrupt lower-ranking officials. “The investor has implicit comfort,” Mr. Fradkov said.

Mr. Putin met for an hour and a half on May 18 with the foreign investors, a group of about 20 people that also included representatives of the Kuwait Investment Authority, the Abu Dhabi Investment Authority and private equity fund Permira, Mr. Fradkov and Mr. Dmitriev said.

Investors are not being asked to write blank checks to the fund, but rather to invest in individual deals, another feature designed to reassure them that they will have control over how their money is spent. Mr. Fradkov said that there were projects in the works and the first deals should be announced within nine months.

Mr. Fradkov would not give specifics about potential deals, but Mr. Dmitriev said one goal of the fund would be to invest in companies that could profit from Russia’s rapidly growing middle class.

Investors may still need to be persuaded. The questions put to Mr. Dmitriev and Mr. Fradkov at the dinner made it clear that many still regarded Russia as risky and unpredictable. When politicians are involved — and not just in Russia — there is always a risk that money will be steered to pet projects.

As Mr. Dmitriev points out, the best way to deal with such concerns will be to generate some big returns in the years to come.

Article source: http://feeds.nytimes.com/click.phdo?i=c325a4bbbebaa1cf7b1d107ebc5e4cfe