Renaissance Capital Expanding In Asia

When Jeremy Sparrow joined Renaissance Capital 11 years ago in New York from Morgan Stanley, the Moscow-based boutique investment bank had only two staff there and about 150 globally in three offices. Today, the New York office has 40 and Renaissance has 1,500 staff operating in more than 20 offices globally.

When he left New York in 2003 to return home to England to join the bank’s office in London, that office had fewer than 20 staff. Today, the London office has about 150 professionals spanning trading, research, asset management and investment banking.

Sparrow came to Hong Kong in January 2010 to set up an Asian presence for Renaissance and became its first employee in the region. Today the bank has 30 staff between Hong Kong and Beijing, a region that Sparrow says holds tremendous growth prospects for the dedicated emerging market investment bank.

麻雀,43岁,文艺复兴时期的Chief Executive Officer for Kong Kong, recently spoke to Institutional Investor’s Asia Bureau Chief Allen T. Cheng about the bank’s ambitions in Asia.

Allen Cheng:Why did Renaissance open in Asia?

Jeremy Sparrow:Our clients demanded that we expand into Asia. We did road shows around Europe and the US, but increasingly our corporate clients really needed an Asian leg – hence we needed an Asian presence. We looked at Singapore versus Hong Kong, but because many of our clients are Russian and commodity-based, they wanted to be close to China, we therefore decided upon Hong Kong as our regional headquarters. When we were looking at the various financial centers, while we realized there are many benefits to operating from Singapore, Hong Kong made sense due to its China connection.

AC:What are your major lines of business here?

JS:First, we aim to bring a series of incoming initial public offerings into Hong Kong from our existing clients, particularly those from Russia, Kazakhstan and Africa. We helped bring United Company RUSAL to Hong Kong with a $2.2 billion IPO last year. We certainly plan to bring a lot more. We currently have three Russian firms and two Kazakh firms in our IPO pipeline for 2011/2012. These firms, majority resources and energy-based, will be seeking primary and secondary listings.

We have also set up a research and distribution platform in Hong Kong- helping institutional clients to trade equities, focusing again on our core disciplines – metals and mining, energy and agriculture. Most firms in Asia focus hugely on China. We largely do ex-China, especially focusing on small to mid-market opportunities within metals and mining, oil and gas. Our analysts spend a lot of time in resource-rich areas like Mongolia [and] Perth in Australia, and we’re just starting to visit Indonesia. Indonesia will become a core market for us as it plays to all our strengths. It will be a pivotal part of our business in this region.

AC:I understand you opened an office in Beijing?

JS:Yes, we did. It’s facilitation office for merger and acquisition work. We hope to help clients in Africa, Kazakhstan, and Russia by connecting them to China. We are initially focused on helping clients to sell assets to the Chinese.

But in the future we do anticipate we will be able to represent the Chinese with buy-side mandates. Due to our substantial network of offices in frontier markets we believe we clearly have unique assets that would be of substantial interest for Chinese corporations.

AC:Tell us why you’re opening offices in emerging markets

JS:As a firm we are absolutely committed to developing markets. We don’t do and have little interest in developed markets. We absolutely believe in having physical assets on the ground where we operate, i.e. bankers and offices. Other banks parachute bankers in, but we spend more time with clients by virtue of having people on the ground. For instance, in Africa, we currently have six offices, and this number may soon increase.

Investors are also interested in how oil and gas and mining assets are developing in Africa and the CIS. We’re in a unique position to educate them via our substantial team of analysts around the world – clearly in commodities all lines come back to China and hence we are seeing increasing interest in Africa and Russia companies from Asia-based investors in our region ex-China, we want to be a provider of meaningful research in metals and mining and oil and gas.

We saw how Russia grew. We are on the ground seeing how Africa is growing. We helped many small companies to grow into $2 billion to $3 billion companies – this experience has equipped us very well to find investment opportunities in Asia – both from investment banking as well as a broking perspective.

We see many opportunities in Asia. For instance, we believe many Australian companies have now outgrown their historically purely domestic investor base. We believe we can help them gain access to a more international investor base. We see many similar opportunities in Mongolia and Indonesia, where resource companies may be at earlier stages of development but can benefit from our rich emerging market expertise.

AC:You seem particularly up on Indonesia. Why?

JS:We want to start investing the firm’s principal money into Asia via Renaissance Partners, our principal investment arm – in particular in resource-rich Indonesia. We recently made Sheldon Trainor our Chairman for Asia. He’s ex- Morgan Stanley and former head of investment banking at Merrill Lynch and has been in Asia for over 20 years. He will help develop and shape our investment banking strategy for the region. We are also partnering with PacBridge, Trainor’s private equity firm, to focus particularly on resource and energy opportunities in Indonesia, where he has been actively involved for some time.

We want to find opportunities that may be relatively small, that may not need enormous funding but we believe will develop into successful companies in time and develop into broader clients for the firm – perhaps capital markets or M&A. We believe there is a very distinct role for a dedicated emerging market bank – one that focuses very specifically in the resources, energy, and agricultural commodity space. We’re very passionate about these three sectors and intend to be meaningful players in those geographies that we have identified.