Desmond Ng, Allianz Global Investors
Ng said the firm was “closely monitoring” plans for a private fund licence from the Asset Management Association of China (AMAC).
“That is the natural next step, particularly looking at how a foreign firm could tap the local market in terms of introducing international capabilities or put together renminbi-denominated solutions for the local market,” Ng said at a recent media event in Hong Kong.
At the moment, there are at least 25 IM WFOEs that are set-up in China. So far, only 10 firms have registered with the AMAC to run a private fund business, which is allowed to target only institutional and high net worth investors.
Other firms are at the beginning stages, such as Vanguard, which plans to develop onshore investment management capabilities before applying for a private fund licence, Charles Lin, Vanguard’s Hong Kong-based managing director and head of China, said last year. At the time, the firm did not have investment management staff for its IM WFOE.
Asset managers planning to launch private funds first need to have staff and systems in place before applying to AMAC in order to ensure they are able to meet the six month deadline for launching a product.
China onshore capabilities
Allianz GI plans to ramp up both its onshore China and Greater China capabilities, Ng said, but did not elaborate.
The firm already has several China- and Greater China-focused funds offered in Hong Kong and Singapore, such as the China A-Shares fund, the China equity fund and the China Multi Income Plus fund, according to data from FE Analytics.
The firm has been offering products to Chinese institutional investors for the past three years. An area of interest has been alternatives such as hedge funds and infrastructure, according to Ng.
“A lot of these investors in China are looking for diversified returns, especially those that have negative or minimal correlation with equities.”
Besides Allianz GI, BNP Paribas Asset Management plans a big build-out of its regional fixed income team, which will include mainland-based analysts for the onshore bond market, Jean Charles Sambor, BNPP AM’s London-based deputy head for emerging market fixed income, told FSA recently.
The firm does not have onshore fixed income capabilities in its investment advisory WFOE in Shanghai despite managing an onshore renminbi bond fund.
“We want to have onshore bond capabilities,” Sambor said. “I have been covering this market for many years but I’m not based in China, so we want to make sure there are local people who know the market.”
2018 break-out year?
China A-shares are slated for inclusion on major global indices this summer, which should provide an A-share market lift.
Ng believes foreign investors will increase exposure to onshore assets this year.
“Our clients outside of the region have been historically been underweight China assets, which are also underrepresented in the global benchmarks, and that is going to change,” he said. “We truly think this is a break-out year for Chinese asset classes.”
Raymond Chan, the firm’s Hong Kong-based chief investment officer for Asia-Pacific equities, said recently that China A-shares are poised to outperform the major Asian equity markets this year.
Chan believes that the driver will be earnings growth.
“The fundamental picture for earnings growth is very good and valuations are really attractive, so if I have to pick a country, I would go for China.”