Chinese fund companies are exploring opportunities to raise assets from qualified foreign institutional investors (QFII) as the retail fund market in China continues to stagnate. However, QFII assets have not been easy to come by, as many QFII managers are not in need of mainland-based investment advisers.
Assets under management in China's retail investment funds have fallen from a peak of Rmb3,000bn ($466bn) in 2007 to Rmb2,300bn as of June 30, according to Shanghai-based consulting firm Z-Ben Advisors.
Currently, there are 113 companies with QFII licences in China, with a combined quota of around USD 20bn, according to data on the China Securities Regulatory Commission website.
"The pie is big and we see large opportunities [for the QFII businesses of Chinese fund companies]," says William Kwok, Hong Kong-based head of the QFII department at Ping An Securities. Chinese fund companies typically provide advisory and trade execution services to QFII clients.
Beijing-based China Asset Management Company is among those expanding its QFII business. "So far we only have a few QFII clients," says Zhang Houqi, the Beijing-based deputy president in charge of China AMC's institutional and international business. "We will focus on our international business development in the future."
China AMC is the largest fund management company in China, running 26 mutual funds with Rmb224.18bn under management as of end-March. However, the group is still in the early stages of expanding its internationalbusiness.
Mr Zhang says China AMC has reached out to companies with QFII licences and is now in the process of stepping up its QFII business.
Rival Harvest Fund Management has a number of clients among companies with QFII licences and is looking to grow that business by adding more people to its investment and servicing teams. Harvest's QFII business is managed by its Hong Kong subsidiary Harvest Global Investments (HGI), which has expanded its sales team. "We have a strong and sizeable pipeline of QFII clients, which includes sovereign wealth funds, pension funds, [and] corporate and asset managers," says Michelle Chua, Hong Kong-based executive director and regional head of business development at HGI.
While Chinese fund companies want to attract foreign investors through QFII funds and services, Ping An's Mr Kwok does not see a strong need for QFII investors to hire local managers at the moment.
Each QFII quota is usually around USD 100m to USD 150m. That is just a small proportion of the total portfolio of an international company, which thus may not need to pick advisers, according to Mr Kwok.
About 50% of companies with QFII licences and quotas use their in-house team to invest in China, Mr Kwok says. Some sovereign wealth funds and university funds, meanwhile, prefer to hire external advisers, he adds.
One industry source notes another potential stumbling block: Chinese fund companies usually charge higher commission fees compared with international standards, placing a premium on their local expertise and capabilities.
However, Chinese fund managers believe QFII investors do need their help. "I think we have better knowledge of the Chinese market than any QFII investors," says China AMC's Mr Zhang. Harvest's Ms Chua holds the same view, noting that many QFII investors do not have a presence in China or focused capabilities on the market. "Given China is a policy-driven economy and market, international investors need the local expertise to identify good investment opportunities," says Ms Chua.
For Sino-foreign joint venture fund management companies, the foreign shareholders play a key role in bringing clients outside of China to the business.
Ping An's Mr Kwok says most international companies with joint ventures in China tend to give their QFII business to their joint venture partners.
Being purely locally owned could be a setback for China AMC in terms of building its QFII business. China AMC's Mr Zhang acknowledges that not having any foreign shareholders to help bring overseas investors to the company is indeed a challenge.
Glori Ye is a reporter on Ignites Asia, a Financial Times publication, where this article first appeared.
Source: http://www.moneycontrol.com
Assets under management in China's retail investment funds have fallen from a peak of Rmb3,000bn ($466bn) in 2007 to Rmb2,300bn as of June 30, according to Shanghai-based consulting firm Z-Ben Advisors.
Currently, there are 113 companies with QFII licences in China, with a combined quota of around USD 20bn, according to data on the China Securities Regulatory Commission website.
"The pie is big and we see large opportunities [for the QFII businesses of Chinese fund companies]," says William Kwok, Hong Kong-based head of the QFII department at Ping An Securities. Chinese fund companies typically provide advisory and trade execution services to QFII clients.
Beijing-based China Asset Management Company is among those expanding its QFII business. "So far we only have a few QFII clients," says Zhang Houqi, the Beijing-based deputy president in charge of China AMC's institutional and international business. "We will focus on our international business development in the future."
China AMC is the largest fund management company in China, running 26 mutual funds with Rmb224.18bn under management as of end-March. However, the group is still in the early stages of expanding its internationalbusiness.
Mr Zhang says China AMC has reached out to companies with QFII licences and is now in the process of stepping up its QFII business.
Rival Harvest Fund Management has a number of clients among companies with QFII licences and is looking to grow that business by adding more people to its investment and servicing teams. Harvest's QFII business is managed by its Hong Kong subsidiary Harvest Global Investments (HGI), which has expanded its sales team. "We have a strong and sizeable pipeline of QFII clients, which includes sovereign wealth funds, pension funds, [and] corporate and asset managers," says Michelle Chua, Hong Kong-based executive director and regional head of business development at HGI.
While Chinese fund companies want to attract foreign investors through QFII funds and services, Ping An's Mr Kwok does not see a strong need for QFII investors to hire local managers at the moment.
Each QFII quota is usually around USD 100m to USD 150m. That is just a small proportion of the total portfolio of an international company, which thus may not need to pick advisers, according to Mr Kwok.
About 50% of companies with QFII licences and quotas use their in-house team to invest in China, Mr Kwok says. Some sovereign wealth funds and university funds, meanwhile, prefer to hire external advisers, he adds.
One industry source notes another potential stumbling block: Chinese fund companies usually charge higher commission fees compared with international standards, placing a premium on their local expertise and capabilities.
However, Chinese fund managers believe QFII investors do need their help. "I think we have better knowledge of the Chinese market than any QFII investors," says China AMC's Mr Zhang. Harvest's Ms Chua holds the same view, noting that many QFII investors do not have a presence in China or focused capabilities on the market. "Given China is a policy-driven economy and market, international investors need the local expertise to identify good investment opportunities," says Ms Chua.
For Sino-foreign joint venture fund management companies, the foreign shareholders play a key role in bringing clients outside of China to the business.
Ping An's Mr Kwok says most international companies with joint ventures in China tend to give their QFII business to their joint venture partners.
Being purely locally owned could be a setback for China AMC in terms of building its QFII business. China AMC's Mr Zhang acknowledges that not having any foreign shareholders to help bring overseas investors to the company is indeed a challenge.
Glori Ye is a reporter on Ignites Asia, a Financial Times publication, where this article first appeared.
Source: http://www.moneycontrol.com
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