Thu, Oct 27, 2016
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. David Einhorn speaks on passive investing, Mylan, his cheapest stock, the Fed[more]

    From Greenlight Capital hedge fund manager David Einhorn (Trades, Portfolio) joined nine other famed investors on Tuesday to talk about stocks at the annual Great Investors’ Best Ideas Investment Symposium in Dallas. Presenters at the annual conference typically pitch one or severa

  2. Investing - Fund set up to buy illiquid hedge fund stakes finds plenty of opportunities, Lansdowne's Roden says likes animal genetics company Genus[more]

    Fund set up to buy illiquid hedge fund stakes finds plenty of opportunities From As ValueWalk reported back in February, earlier this year Andrew Lawrence set out to raise $250 million to $500 million for a fund that will buy stakes in hedge funds that have suspended redem

  3. Opalesque Roundtable: Style drift, poor communications and credibility fatigue are biggest red flags for hedge funds investors[more]

    Komfie Manalo, Opalesque Asia: Style drift, poor communications and credibility fatigue are the biggest red flags for hedge funds investors, said participants of the latest 2016 Opalesque Investor Roundtable, sponso

  4. Barclay CTA Index down 0.40% in September (+0.10% YTD)[more]

    Managed futures traders lost 0.40% in September according to the Barclay CTA Index compiled by BarclayHedge. The Index is up 0.10% year to date. “The US Fed, in spite of its hawkish tone, opted to hold rates steady which roiled financial markets,” says Sol Waksman, founder and president of BarclayHe

  5. Opalesque Exclusive: Meet Emma, your friendly A.I. helper[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Shaunka Khire, who co-designed an artificial intelligence (AI) robot called EMMA/MANSI, talks to Opalesque