SHANGHAI Dec 12 Foreign money managers in China
have begun chasing after tens of billions of dollars of funds
expected to be drawn in coming years by Beijing's stepped-up
opening of its capital markets, creating fresh opportunities for
China's stagnant fund sector.
China this year boosted its Qualified Foreign Institutional
Investor (QFII) scheme, the main channel for foreign investment
into China's stock and bond markets, hoping to attract long-term
players such as pension and endowment funds to help stabilise
the country's volatile, speculator-driven stock market.
But many of these foreign funds lack the networks and
knowledge to invest directly in China, and are turning to
third-party managers or advisers to help with their portfolios.
"A lot of new names are coming on. They don't have a footing
in China, but they're eager to get into asset allocation," said
Gerard DeBenedetto, CEO of AZ Investment Management, an advisory
firm majority-owned by Italian asset manager Azimut Holding Spa
. His firm has seen a pickup in enquiries from QFII
investors over the past six months, he added.
Many of China's domestic fund managers lack the basics, such
as English-speaking staff or IT systems suitable for QFII
business, and have shorter investment horizons with typically
faster turnover in stock holdings and investment managers than
foreign-invested asset managers, industry executives and
This presents an advantage to foreign fund companies, which
are required to operate in China through joint ventures with
domestic partners and already have a major presence in the fund
sector with a 57 percent share of assets under management.
Targeting the QFII expansion as an opportunity for new
business, executives from the Chinese fund ventures of BNP
Paribas, Assicurazioni Generali and Deutsche
Bank have recently travelled overseas to meet
BOON TO STAGNANT SECTOR
China regulators in April vowed to expand the QFII scheme to
$80 billion from a previous ceiling of $30 billion and have
speeded up approvals of investment quotas for specific
A record $2.8 billion in quotas received approval in
October, more than 10 times the monthly average of the past
three years, and some analysts expect the new ceiling to be hit
in three years' time.
While even the expanded QFII scheme represents less than 3
percent of total capitalisation of China's stock markets, its
rapid growth is a boon to the mutual fund industry, where assets
under management have shrunk one-fifth to 2.4 trillion yuan
($384 billion) over the past five years.
Many of the new QFII quotas granted this year have focused
on long-term investors, such as sovereign wealth funds and
Tomas Franzen, chief investment strategist at the Second
Swedish National Pension Fund, which manages 227 billion crowns
($34 billion) globally, said the fund has recently been granted
a QFII licence and is now looking for a manager to help it
invest in China.
"Generally speaking, we feel our analysis of the Chinese
market is not adequate ... so we hope to find good fund managers
to help us achieve good returns," he said. The pension fund has
not yet received a quota from the Chinese regulator.
Ted Lee, a senior executive at Canada Pension Plan
Investment Board, which obtained its $100 million QFII quota in
March, said he expects Chinese assets to become a very important
part of the fund's portfolio over the next five to 10 years, and
is seeking local advisers in China.