Hywin’s debacle underscores close links between China’s property and wealth management sectors

  • Hywin Wealth, controlled by Nasdaq-listed Hywin Holdings, says its ‘projects were delayed due to a declining economy’ after talk of repayment difficulties
  • The Shanghai-based wealth manager says it has set up a special committee to look into the matter

Hywin Wealth, a Shanghai-based wealth management company with ties to embattled property developer China Evergrande Group, said it would look into missed payments on its investment products, after talk of repayment difficulties sent shares of its Nasdaq-listed parent plunging to a third of its value over the past week.

Hywin Wealth, controlled by Nasdaq-listed Hywin Holdings, said in a statement on Sunday that its “projects were delayed due to a declining economy”, and that it had established a special investigation committee to “proactively coordinate relevant parties in planning solutions”.

A relatively small player in China’s US$3 trillion shadow banking industry, Hywin Holdings had 8.5 billion yuan (US$1.2 billion) in assets under management as of June 2023, according to a filing with the US Securities and Exchange Commission.

Founded in 2006, Hywin Wealth has over 2,500 employees and offers asset management and consulting services to over 146,000 high-net-worth individuals and institutions, according to the company’s website.

“In accordance with the most recent regulatory policy and industry guidance, Hywin Wealth has volunteered to withdraw and sort out our existing businesses,” the company said in the December 17 statement. “We will inform everyone about relevant solutions by the end of the month, and we hope people will refrain from believing in and spreading rumours.”

Hywin Wealth did not respond to the Post’s request for comment.

Shen Meng, director at Beijing-based investment firm Chanson & Company, said Hywin Wealth showed how closely intertwined China’s wealth management industry is with the stricken property sector.

“A potential default [by Hywin Wealth] will not have the same scope of influence as the other larger wealth management companies that have previously gone bust, such as Zhongzhi, but this goes to show the challenges that our country’s economy is facing at the moment,” said Shen.

Zhongzhi Enterprise Group, one of mainland China’s largest shadow banks, warned investors last month about its inability to repay its debts, setting off alarm bells in the trust sector which invests a large portion of investors’ money in real estate projects.

A company prospectus described Hywin Holdings as one of China’s largest third-party wealth management companies as well as the country’s top provider of real estate-related fixed income products. Hywin Holdings’ products primarily fund real estate projects developed by Evergrande, Sunac and other large developers, with maturities ranging from six months to three years.

The Sunday announcement comes after an online message, circulating on Chinese social media WeChat, said Hywin Wealth had informed its investors there might be a delay of over a week in repayments of some of its investment products. It cited challenges such as regulatory crackdowns on corruption in the financial sector as reasons for the delay.

Hywin Holdings had announced on December 14 that “redemption issues have been reported on certain asset-backed products”, noting that it was only acting as a distributor for these products.

“Any failure to adequately deal with these redemption issues could materially and adversely affect our reputation, client relationship, business, financial condition and prospects,” Hywin Holdings said, adding that it has formed a special investigation committee to make an internal probe.

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