New China Life Insurance is partnering with CICC Capital in the formation of a 10-billion-yuan ($1.4 billion) fund for investments in companies with real estate assets, as the state-owned life insurer joins an array of domestic peers bottom-fishing in the country’s property market.
Beijing-based New China Life intends to contribute 9.999 billion yuan ($1.4 billion) to the fund as a limited partner (LP), the firm disclosed in a stock exchange filing on Monday.
CICC Capital, an affiliate of China’s top investment bank CICC, will invest 1 million yuan (about $140,610) and serve as the general partner (GP).
The fund, whose formation is still subject to regulatory approvals like fund filing, will mainly invest directly or indirectly in companies with assets of real estate projects held for operation by equity, according to the filing.
New China Life is the country’s latest insurer to invest in real estate for long-term returns despite a market slowdown. However, the firm’s approach of building a dedicated fund differentiates it from counterparts that predominantly invest in this market by directly acquiring property assets.
Despite being touted among fund managers as the providers of “patient capital,” Chinese insurers are still in their early days of making equity investments. As their favour for low-risk, stable investment options like bonds persists, the total value of equity investments accounted for just 2.48% of the overall asset allocations by Chinese insurers by the end of 2022, according to a September 2023 report compiled by the Insurance Asset Management Association of China.
The new fund will allow New China Life to leverage the investment expertise of CICC Capital, said the firm. It looks to expand investment channels, explore investment opportunities, and diversify its assets under management (AUM).
New China Life’s total assets crossed 5.5 trillion yuan (about $774 billion) in mid-2023, up 9.9% from the end of 2022, according to its latest financial results filed in August 2023.
The fund will have a four-year investment period, during which CICC Capital will charge an annual management fee of 0.4% of the initial amount of LP(s)’ paid-in capital contribution. The fund life is designed to be eight years, subject to change based on the business needs.
This new fund commitment comes just over one month after New China Life announced its plan to build a 50-billion-yuan ($7 billion) private fund in partnership with another state-owned life insurance giant China Life Insurance to invest in publicly traded stocks.
The duo agreed to each contribute 25 billion yuan to the securities investment fund and jointly establish a new company for the fund management.