Gaw Capital Partners will enter the Chinese real estate distressed debt market through a US$1bn (€834m) joint venture with the investment arm of Country Garden Group.
Gaw will partner Shenzhen Paladin Asset Management, with plans to invest up to a billion dollars through a special situations fund to buy into distressed real estate projects in China.
A Gaw spokeswoman confirmed the joint venture with Shenzhen Paladin, but said there was no plan to establish a separate fund yet.
“We will invest through our own funds and may open for co-investment from our existing LPs,” she told IPE Real Assets. “It really depends on the future deal flow.”
Last year, Gaw Capital, one of Asia’s most active fund managers, raised $1.3bn for its largest-ever Asia-Pacific fund.
Shenzhen Paladin was established in 2015 by Country Garden, one of China’s largest property developers, to manage its investments.
China has been grappling with a mountain of commercial loans across its economy, including many in the real estate sector.
It is said to have some US$256bn in official non-performing loans.
Real estate debt has been identified as an asset class that is increasingly attractive to foreign investors, who see it as a way of securing assets in the Chinese property market.
China’s distressed debt market has already seen a number of international players either set up new investment funds to target Chinese debt or acquire new distressed assets.
Groups which have entered the market include Bain Capital, Blackstone and Oaktree Capital Management.
However, sources have told IPE Real Assets that, unlike developed markets - where investors are able to purchase debt in billion-dollar tranches - the lot sizes in China will be much smaller.
These sources said investors will have to be prepared to build up a debt portfolio over time.