Published by Fund Selector Asia – 23rd Jul 2018
Foreign firms continue to build a base in China’s private fund market by becoming eligible to launch products for domestic institutional and high net worth investors.
Value Partners is the most recent asset manager to launch an onshore fund, the Value Partners PFM China A Share Jade Fund 1, which was incepted on 2 July.
It is the second equity product the firm launched through its onshore fund structure after obtaining a private fund management (PFM) license in November 2017.
The fund is managed by the Shanghai-based investment team, led by the firm’s investment director and head of China business Yu Xiaobo, according to the firm’s Hong Kong-based spokeswoman.
Yu also oversees the firm’s other private fund sold in China, the PFM Neo-China A Share Fund 1, which was incepted in January this year. Both products, available only to domestic qualified (institutional and high net worth) investors, invest in China’s onshore equity with a value investing approach using a bottom-up stock selection, according to the firm.
Value Partners considers the China market the main driver for asset growth and is planning to roll out more funds under the PFM infrastructure, the spokeswoman added, without specifying the strategies.
Last week, Singapore-based APS Asset Management was added to the growing club of foreign PFM license holders, bringing a total of 14 global managers eligible to launch funds to domestic sophisticated investors. US-based hedge fund Bridgewater Associates and British quant fund manager Winton Capital were approved earlier this month.
APS registered with the Asset Management Association of China (Amac) on 17 July and plans to introduce a product investing in China’s A-shares using a benchmark-agnostic, long-term investing approach, according to a statement from the firm. APS is required to launch at least one product in the six months following registration with Amac.
The manager established its first entity in China in the form of an investment advisory wholly foreign-owned enterprise (WFOE) in November 2002, and then filed to Amac on converting into an investment management WFOE in 2016, making it eligible to apply for the PFM license. The WFOE has hired 14 licensed staff, Amac’s database shows.
In addition, the firm manages $2.3bn in assets in China’s onshore stock markets through the qualified foreign institutional investors (QFII) quota programme, the firm’s statement noted. In Singapore, the firm manages and distributes four equity products to retail investors, according to FE Analytics. They are: Alpha Fund, Far East Alpha Fund, Japan Alpha Fund and Vietnam Alpha Fund.
QDLP
Amac’s database revealed that the WFOEs of Aberdeen Standard Investment and Alliance Bernstein were granted the qualified domestic limited partnership (QDLP) qualification.
Unlike the PFM scheme, the QDLP programme allows asset managers to raise money onshore to invest in offshore traditional and alternative investments, including overseas equity and bond funds, hedge funds and real estate.
Earlier this month, the Shanghai-based operations of the two firms, the Aberdeen Standard Overseas Investment Fund Management and AB’s Overseas Investment Fund Management, registered with Amac. For each new license holder, the association places a six-month deadline for the first QDLP product launch. Therefore, ASI and AB will have to launch at least one product each by January 2019.
ASI’s onshore operation is led by the firm’s head of China, Amy Wang, and operated by four other licensed staff, according to the firm’s filing to Amac. Wang, who joined the firm in August last year, also oversees the firm’s private fund management (raising domestic assets to invest domestically) operation.
Alliance Bernstein did not respond to a request for further information about its onshore plans. A recent statement from the firm said it has made two senior appointments for the China team, adding Alex Qian as CEO for China and Liang Zhu as chief investment officer, both based in Shanghai.
Another manager, Neuberger Berman in June received approval for the QDLP programme, FSA reported. Additionally, BNP Paribas Asset Management told FSA that it will use the qualified domestic limited partnership (QDLP) scheme to launch a water-related global equity product, which invests using ESG principles.
Among the 19 QDLP quota holders in Shanghai, ASI, Blackrock, Man Group, NB, UBS Asset Management and Value Partners also operate PFM WFOEs.
The total investable assets of HNWIs are expected to more than double to reach $17trn by 2022, according to a report by Oliver Wyman, a consulting firm. According to Amac data, the $2.16trn private fund industry in China sources 65% of its assets from HNWIs.
