May 2021
CURRENT ISSUE
AAM Magazine
May 2021
Back to news

China okays private fund launches by eight foreign firms in 2020

China
By Hui Ching-hoo   
April 14, 2021

China gave eight foreign-owned firms the green light to distribute private funds last year, raising the total number of approved firms to 31, according to data compiled by Shanghai-based investment consultancy Z-Ben Advisors and shared with Asia Asset Management (AAM).

The eight wholly foreign-owned enterprises or WFOE include subsidiaries of Scottish fund manager Baillie Gifford, Hong Kong’s Income Partners, South Korea’s Hanwha Asset Management, Singapore’s iFAST Corporation, and France’s Metori.

Baillie Gifford was the only one among them to also be designated as qualified domestic limited partnership (QDLP) by the Asset Management Association of China (AMAC), allowing the firm to raise renminbi-denominated capital in China for investments overseas.

Four others firms, including Amundi Asset Management and Franklin Templeton, were also designated as QDLP last year.

WFOE are allowed to participate in various businesses in China, including investment advisory services and private fund investment. Those that intend to sell private funds to wealthy individuals and run QDLP business are required to register as private fund managers with AMAC.

Z-Ben says there are now 29 WFOE that haven’t obtained both private fund manager and QDLP status.

Foreign asset managers have become “increasingly active” participants

in China’s onshore fund business in recent years since Beijing loosened restrictions that previously allowed their wholly-owned units to only manage equity funds, according to Ray Chou, a partner at management consulting firm Oliver Wyman.

“WFOE participants are allowed to issue more fund types,” Chou tells AAM. “Their product offerings [have now] diversified from traditional equity funds into multi-asset, fixed income, and macro strategies.”

Zen-Ben’s data shows that UBS Shanghai heads the list of the ten most active WFOEs, with 17 funds introduced since inception in 2017, followed by Schroders Investment Management (Shanghai) with six.

Chou says some foreign managers may move faster because they have long-term partnerships with Chinese banks or securities houses with well-established distribution networks and multiple investment capabilities.

Top ten WFOE players

Foreign owner

AMAC
registration

Number of
product

AUM
(RMB)

Latest set-up date

Registered Capital
(USD m)

Baillie Gifford

9/1/2020

1

< 500m

5/30/2019

71.13

UBS

7/14/2017

17

2bn - 5bn

4/18/2017

49.50

Bridgewater

6/29/2018

2

1bn - 2bn

3/7/2016

44.04

Fidelity

1/3/2017

4

< 500m

9/14/2015

42.00

Schroders

12/25/2017

6

< 500m

6/22/2017

25.44

Eastspring

10/16/2018

2

< 500m

3/5/2018

24.00

AllianceBernstein

3/1/2019

1

< 500m

9/7/2017

22.00

JP Morgan

-

-

-

8/24/2016

21.48

Invesco

11/9/2017

1

< 500m

4/13/2017

20.00

Nomura

6/20/2019

2

< 500m

1/8/2018

20.00

Source: Z-Ben Advisors

According to Z-Ben, six international managers – Schroders, Neuberger Berman, Van Eck, AllianceBernstein, Fidelity and BlackRock – have filed applications to launch mutual funds since Beijing opened up the public fund market to foreign firms in 2019. BlackRock, the world’s largest asset manager, is the only one that’s been approved thus far.

Chou says mutual fund investors in China are very performance oriented. This gives local managers an edge because investors can easily check the performance of Chinese fund houses and their market history.

But Chou says foreign players can compete with their international brands and track records in private fund and advisory services.