Beijing: Beijing’s move to give international asset managers greater access to Chinese investors has been hailed as the “holy grail” for fund groups eager to attract investors from the world’s biggest economy. Hong Kong and Chinese authorities confirmed late last week that international fund managers would be able to sell Hong Kong-registered funds directly to Chinese investors for the first time from July 1.
The launch of the framework is considered a game changer for international fund companies who will now be able to access wealthy investors in a country that boasts 750,000 millionaires.
Chris Powers, an analyst at Z-Ben, the Shanghai-based asset management consultancy, said: “For foreign managers, the ability to market and sell their products on the mainland has long been the holy grail. This is absolutely one of the biggest steps forward in terms of fund management in China.”
The programme, known as the mutual fund recognition framework, has been anticipated by the investment community since 2013, prompting some fund houses to invest substantially in their Hong Kong presence ahead of its launch.
Fidelity, Invesco, JPMorgan Asset Management and BEA Union Investments, a joint venture between the Bank of East Asia and Germany’s Union Asset Management, are particularly well positioned to benefit from the framework, according to Powers.
“This is potentially the best, most direct way to access Chinese investors. Astute managers have been preparing for this for years,” he said.
To be eligible to sell funds under the framework, investment products must have a record of more than one year and assets under management of at least Rmb200 million ($32 million, Dh117.4 million).
So far, roughly 100 funds from Hong Kong and 850 mainland funds have qualified under the programme, which forms part of a broader attempt by Chinese authorities to open its financial markets to outside investors and strengthen its domestic fund industry.
Stewart Aldcroft, Asia chief executive of CitiTrust, Citigroup’s securities and funds services business, said: “This is really big news. The programme will generate a lot of interest from managers in the US and Europe and you will see a lot of activity and new partnerships [between western and Asian fund groups]. This is only the start of a long-term project.”
Aldcroft predicted that the programme would lead to marketing and sales agreements between Chinese internet giants such as Alibaba and Tencent and large international fund houses that currently have no brand recognition in China.
The influence of these internet companies among Chinese investors has been demonstrated by the explosive growth of online money market funds, according to Aldcroft. He said that banks’ share of the domestic fund industry has fallen from 80 per cent to 60 per cent in the past two years as a result.
There are doubts about whether foreign asset managers will be able to sell funds to mainland investors who have historically demonstrated limited interest in overseas exposure. “There really has not been that much interest in foreign products. This is a definite worry for companies,” said Powers.
Fund groups with a strong Hong Kong presence, a joint venture with a Chinese partner and a wholly owned foreign enterprise established in Shanghai would stand “a better chance of surviving” in the mainland market, he added.
Financial Times
