Aberdeen Standard launches A-share fund in China

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Following other foreign asset managers, ASI has launched an equity fund in China through its investment management wholly foreign-owned enterprise (IM WFOE), targeting qualified domestic investors.

China set to approve 10 onshore licences this year

Aberdeen Standard Investments (ASI) has become the eighth foreign manager to roll out a private fund in China, bringing a total of 11 products managed by foreign players. Private funds are available for sale only to domestic qualified (high net worth individuals and institutional) investors.

The equity fund, investing in around 30 onshore A-shares, was incepted on 4 May, the firm’s filing to the Asset Management Association of China (Amac) shows. The launch comes around five months after the firm obtained its private fund management (PFM) licence in December 2017.

The investment team believes consumption-related companies will be the beneficiary of a growing economy in China, according to a statement from the firm. The portfolio therefore has a relatively heavy focus on the companies that provide consumer products, travel, wealth management and healthcare services.

“As the progressive financial reforms continue to improve the accessibility and liquidity of the domestic market, it is presenting active managers like us with new opportunities,” Nicholas Yeo, head of China equities, said in the statement.

He added that increasing foreign participation in the A-share market will raise the overall governance level among local companies.

ASI was among the first foreign asset managers to establish a WFOE in Shanghai in 2015. Amac’s data also shows that the firm’s Shanghai office currently has at least nine employees under the leadership of Wang.

In January, ASI received additional RMB 5.3bn ($840m) in renminbi qualified foreign institutional investor (RQFII) quota, which enables the firm to invest in onshore Chinese assets. It has become one of the biggest RQFII quota holders, according to records from China’s State Administration for Foreign Exchange.

It has been a year since the debut of the first ever fund product launched by a foreign firm in China. In May 2017, Fidelity International received the approval to distribute its China Bond No.1 Private Fund to qualified investors in the country.

FSA found out that so far five firms have reported to Amac that they gathered at least RMB 100m ($15.72m) in their private funds. However, the funds managed by Singapore-based Fullerton Fund Management, Invesco and Neuberger Berman have not yet surpassed the mark of RMB 100m in assets.

 

Asset under management of IM WFOEs

RMB 100m-1bn

<RMB 100m

Aberdeen Standard

Fullerton

Fidelity Investments

Invesco
Man investments

Neuberger Berman

UBS AM

Value Partners

Source: Amac records on 17 May, 2018.

While more private fund products are offered to Chinese investors, the number of PFM licence holders has stagnated. Since the beginning of 2018, Italian asset manager Azimut was the only firm that received approval.

Moreover, foreign firms can now enter China’s fund market in several ways. Apart from registering as a PFM licence holder, China’s regulator has resumed the qualified domestic limited partnership (QDLP) scheme. The scheme allows foreign asset managers to raise money onshore to invest in offshore traditional and alternative investments, including long-only equity and bond funds, hedge funds and real estate.

Earlier this month, BNP Paribas, which was granted a $50m quota for the QDLP programme, said it plans to launch a water-related strategy that focuses on water-related companies and applies the principles of environmental, social and corporate governance (ESG) investing.

 

Source: FSA. * Chinese names only.

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