CSOP Asset Management, a joint venture between China Southern Asset Management and OP Financial Investments, is set to participate in the mutual recognition of funds (MRF) arrangement between Mainland China and Hong Kong, by partnering with both Chinese and overseas managers who are seeking a distribution channel in each other’s market.
Currently, the majority of CSOP’s actively managed products are either UCITS funds or focussed on the Mainland market, and so cannot be distributed to Mainland China under the MRF.
“Traditionally some of our actively managed mutual funds have been UCITS-based,” Melody He, the firm’s head of capital markets, institutional client group, told Asia Asset Management. “We are looking at what kind of strategies we should launch here in Hong Kong in order to participate in the mutual recognition of funds arrangement between the Mainland and Hong Kong.”
In addition to launching new products, Ms. He said the firm is in talks with other asset managers who want to leverage CSOP’s distribution channel to sell their products to Mainland China under the MRF. “In the near future we don’t have to be restricted to CSOP funds. We could be looking at other alternatives as well.”
Ms. He added that CSOP could help both Mainland and overseas managers who participate in the MRF to tap offshore and Mainland investors respectively.
Additionally, the fund industry is focussing on the development of exchange-traded funds (ETFs) participating in the MRF. In terms of the ETF business, Ms. He believes CSOP’s MSCI T50 ETF, which tracks the top internet companies listed in Hong Kong or the US, could be a potential product eligible for the MRF given its offshore exposure.
Despite being among the first batch of products incorporated in the fund passport scheme, according to the official announcement, it is expected that ETFs may not be as quick as plain vanilla actively managed funds in obtaining the approval for fund distribution under the scheme. This is because the authorities are still ironing out the technical and operational issues surrounding cross-listing and secondary trading of ETFs.
