Fri, Jan 19, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Qualified expectations for Chinese asset management expansion overseas

Thursday, December 05, 2013

Latest research from Cerulli entitled Asset Management in China 2013 finds that a spate of regulatory changes has unleashed opportunities for Chinese asset managers to potentially expand into regional markets. The firm finds that as the domestic market gets tougher, with mutual fund assets under management still below 2009 levels, many managers are venturing abroad.

However, Cerulli reports that obstacles lie in the way of potential international expansion, the largest being that Chinese fund houses still face distrust in areas like compliance and risk assessment processes. The firm writes: "They are making up for this by playing up their Chinese market expertise. They are also hiring executives with overseas experience to demonstrate their commitment to better governance and an international outlook."

Rachel Poh, an analyst with Cerulli who contributed to the report says: "In particular, the Qualified Financial Institutional Investor (QFII) advisory business remains very important to Chinese firms in Hong Kong. Recent QFII activities have centered on institutions in Asia. Prior to 2011, there were 34 Asia-based institutions that received their approvals and quota (excluding Hong Kong). Since then, 39 more have been added to the list as of August 2013, with 25 of those coming in 2012."

The report found that some Chinese asset managers are directly pitching to prospective clients, while others prefer to go through networks or consultants. However, Chinese private funds present strong competition in the sphere of QFII advisory services.

"These firms tend to be favored by consultants because the managers have equity stakes in the firm and their interests are seen to be better aligned with clients," says Felix Ng, a senior analyst with Cerulli. The Renminbi Qualified Financial Institutional Investor (RQFII) program offers an insight into the intense competition in the market. With the program expanded to London, Singapore, and likely soon to Taiwan, the outlook for RQFII opportunities appears mixed in Hong Kong where many Chinese managers have a presence. Cerulli reports that some see room to develop more RQFII exchange-traded funds (ETFs) while others worry about whether the RQFII ETF market is becoming saturated.

"The launch of China Universal's CSI 300 Index ETF in July might serve as a good barometer on whether such sentiments hold true, given that China AMC launched an identical ETF a year ago," Ng adds. As at end-August this year, China Universal's CSI 300 ETF only had AUM of RMB812.3m ($131.3m) while China AMC's ETF had AUM of RMB9.3bn. "Regardless, RQFII ETFs will see more listings beyond those of Hong Kong. The recent partnership between Harvest Global Investment and Deutsche to launch a CSI 300 Index in New York could be an example of an emerging business model for internationalization of RQFII ETFs in the near future," Ng said.

Looking across the Asian regions, Cerulli found that major Taiwanese Financial Holding Companies (FHCs) such as Cathay, Fubon, and Yuanta Polaris are setting up joint ventures on the mainland via their asset management arms. The report says: "Further, a handful of other Taiwanese firms are reportedly in talks with Chinese asset managers in Hong Kong on strategic partnerships relating to distribution and research. However, the expected advent of the mutual recognition arrangement (MRA) between Hong Kong and China is causing Taiwanese asset managers to rethink their strategies for Greater China. They believe foreign investors might choose to go directly to Chinese mutual funds that are likely to be offered in Hong Kong under the MRA."

Nevertheless, these firms appear likely to increase their footprint in Greater China in the near future. "Taiwanese FHCs' interest in China goes beyond asset management. Many of them have banking, insurance, and securities businesses as well, and will be looking to expand those lines of business in China too," says Ken Yap, Singapore-based director and head of Asia-Pacific research at Cerulli.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Legal - Former Och Ziff hedge fund executive indicted for fraud in Africa investment scheme, prosecutor says, Hedge fund blasts defense of Puerto Rico restructuring law[more]

    Former Och Ziff hedge fund executive indicted for fraud in Africa investment scheme, prosecutor says From CNBC.com: A former hedge fund executive faces federal charges for defrauding a UK-based charity over investments in Africa, according to a grand jury indictment made public Wednesday.

  2. U.S. economy, inflation and alternative investments to dominate 2018 markets, says family office Wilmington Trust[more]

    Komfie Manalo, Opalesque Asia: The emergence of a late-cycle economy in the U.S., the mystery of inflation and growth from a domestic and global perspective, and the potential for alternative investments to prosper against a backdrop of rich valuations, low yields, and higher volatility are the t

  3. Performance - Some hedge funds deliver double-digit gains for 2017, Brevan Howard's hedge fund suffers biggest annual loss in 2017, Crispin Odey's flagship hedge fund plummeted about 20% in 2017, Profits fall 90% at ex-Morgan Stanley banker's hedge fund, Fannie-Freddie overhaul might mint hedge fund riches, losses[more]

    Some hedge funds deliver double-digit gains for 2017 From Reuters/Investing.com: A handful of hedge funds ended 2017 with double digit returns, their investors said, at a time the $3 trillion industry took in fresh money and posted its best returns in years, industry data show. Act

  4. Investing - Hedge funds start 2018 with record $19 billion bet on the euro, Hedge fund Kora Management invests in Satin Creditcare[more]

    Hedge funds start 2018 with record $19 billion bet on the euro From Reuters.com: Hedge funds have kicked off 2018 with their biggest bet ever on the euro rising, a clear vote of confidence in the single currency but, with positioning so stretched, one which could backfire in the near ter

  5. News Briefs - Mobius to retire from Franklin Templeton, Authorities decrypt smart phone of Princeton grad charged with killing Manhattan hedge fund dad, Investigators seize (more) antiques from hedge-fund billionaire Michael Steinhardt's collection[more]

    Mobius to retire from Franklin Templeton Emerging markets pioneer Mark Mobius will be stepping down as executive chairman of the Templeton Emerging Markets Group (TEMG) and formally retire from Franklin Templeton on 31 January. He will also be relinquishing his post as portfolio manager