Morgan Stanley latest to launch RMB fund

The financial services firm will establish its headquarters for Chinese private equity investment in the city of Hangzhou.

Morgan Stanley has signed a memorandum of understanding with the Hangzhou Municipal government to launch an RMB-denominated private equity fund, according to a statement by the Hangzhou government.

Without giving further details of the fund, the statement also said that Morgan Stanley is to establish its headquarters for Chinese private equity investment in Hangzhou. The firm's in-house private equity group Morgan Stanley Private Equity Asia already has offices in Hong Kong, Beijing, Mumbai, Seoul and Tokyo, from which it has invested more than $1.6 billion in the region over the past 15 years.

Neither Morgan Stanley nor the Hangzhou government could be reached by press time.

According to the statement, the Hangzhou government hopes the partnership could boost the local private equity industry and lead Hangzhou a step closer to the goal of becoming a regional financial center.

Morgan Stanley has had a relationship with the city of Hangzhou since April 2008, when it acquired a 19.9 percent stake in asset manager and corporate financier Hangzhou Industrial & Commercial Trust.

Last week, Morgan Stanley reportedly secured an approval from China’s regulatory authorities to sell its 34.3 percent stake in China International Capital Corporation (CICC), paving the way for a potential sale to suitors which reportedly include private equity firms TPG Capital and Kohlberg Kravis Roberts.

A successful exit, which would be valued at more than $1 billion according to media reports, would allow Morgan Stanley to pursue a joint venture with mid-sized brokerage China Fortune Securities, as Chinese legislation forbids foreign companies from having more than one joint venture at a time in the country.

The US firm has reportedly been keen to launch a venture with China Fortune Securities since 2007, when it first attempted to exit its stake in CICC.