Sat, Jan 31, 2015
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. Opalesque Exclusive: Ex-Citi trader launches 'sleep-at-night’ long/short equity fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: After working at Citi's proprietary trading desk, managing a large portfolio between 2008 and 2011, Joel S. Salomon founded SalaurMor Management in New Yor

  2. Investing - U.S. investors favor currency hedged Europe ETFs as euro tumbles, Quants win back investors as Swiss franc fuels volatility gains, David Einhorn's $7bn hedge fund is loading up on this stock, Hedge fund BlueMountain Capital unveils Ocwen Financial short, claims default on notes[more]

    U.S. investors favor currency hedged Europe ETFs as euro tumbles From Reuters.com: U.S. investors stung by the falling euro who want to stay invested in Europe are turning to exchange-traded funds designed to strip out the impact of the region's currency. The biggest among so-called "cur

  3. News Briefs - Millennials use tech tools to jump into investing, Winklevoss twins to launch bitcoin exchange with FDIC insured deposits, Robertson’s legacy from hedge funds to New Zealand, Real estate managers exploring smaller open-end funds[more]

    Millennials use tech tools to jump into investing It is the Facebookification of monetary investing. From social networking platforms that enable young investors to stick to every other's stock-picking mojo, to internet sites for initially-timers hungry for a piece of the Silicon Valley

  4. Update: Prosecutors seek 12 years for hedge fund manager Francisco Illarramendi[more]

    Komfie Manalo, Opalesque Asia: Federal prosecutors have asked the court to sentence convicted hedge fund manager Francisco Illarramendi to 12 years imprisonment for running an elaborate Ponzi scheme that bilked investors hundreds of millions in dollars, including a Venezuelan pension fund, report

  5. Institutions - Ontario pension fund leader calls all asset classes ‘expensive’, Taiwan's BLF plans $2bn in alternative mandates[more]

    Ontario pension fund leader calls all asset classes ‘expensive’ From WSJ.com: The head of one of the world’s largest pension funds said that across asset classes, “everything is expensive.” Ron Mock, who leads Canada’s $141 billion Ontario Teachers’ Pension Plan, said that the plan would