U.S. asset manager Van Eck to abort mutual fund plan in China -sources

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Illustration shows U.S. dollar and Chinese Yuan banknotes
U.S. Dollar and Chinese Yuan banknotes are seen in this illustration taken January 30, 2023. REUTERS/Dado Ruvic/Illustration

HONG KONG, Feb 15 (Reuters) - American investment manager Van Eck will terminate a plan that has been in the works for over two years to establish a Chinese mutual fund unit due to business uncertainties, three sources with direct knowledge said.

The withdrawal is the first by a foreign asset manager that has submitted an application for a China mutual fund license, as rising Sino-U.S. tensions cloud the prospects for foreign businesses in the world's second-biggest economy.

The board of the privately held U.S. firm with $69 billion in assets under management decided in December it would no longer pursue entering China’s $3.8 trillion mutual fund industry, according to two sources with direct knowledge who asked not to be named as the matter is private.

Uncertainties over U.S.-China relations and a delay in launching the business due to COVID-related reasons were the key concerns, one of the sources said, without elaborating.

The decision also comes as Van Eck’s business has suffered from the war in Ukraine, as it had to wind down its Russia-centric exchange-traded funds in December after suspending trading of the products, the source said.

Van Eck declined to comment.

China in 2020 removed foreign ownership caps in its mutual fund industry, allowing global asset managers such as BlackRock and Fidelity to set up fully owned retail fund units.

Van Eck, among the first batch of six applicants that year, committed 100 million yuan ($14.62 million) to set up an entity in Shanghai, official business registration records show.

Similarly, U.S. money manager Vanguard Group in 2021 dropped a plan to obtain a mutual funds licence in China, citing a "crowded" market. It’s not publicly known how much the firm had planned to invest in the China business.

Van Eck is considering maintaining a smaller presence in China by helping mainland Chinese invest offshore via the qualified domestic limited partner programme (QDLP), an outbound investment scheme, two of the sources said.

Richard Tang, who was hired to lead Van Eck's China mutual fund unit, is on leave but has not officially terminate his role within the company, according to two sources. Tang declined to comment.

China only saw 1.8% growth in the size of its mutual fund market last year, ending a years-long streak of double-digit annual expansion.

($1 = 6.8388 Chinese yuan renminbi)

Reporting by Samuel Shen in Shanghai and Selena Li in Hong Kong; Editing by Bernadette Baum

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