Posted inESG

Chinese investors sharpen ESG focus

Amid robust demand for onshore retail funds by foreign fund houses, Chinese investors are paying closer attention to these managers’ ESG commitments.
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Spurred by demand from domestic investors, China continues to be a key growth market for many overseas asset managers.

This is according to “The Future of Asset Management in China 2021” study, published by FleishmanHillard, showing that assets under management (AUM) as at the end of June 2021 had reached RMB23.03trn ($3.5trn), having grown 34% year-on-year.

“China is emerging from the pandemic in a strong position, which is feeding into growing confidence among local investors and in turn benefiting demand for foreign asset managers’ services as they enter into this fast-opening market,” Patrick Yu, Asia Pacific lead of FleishmanHillard’s financial and professional services practice, said in a statement.

Among the main research findings, Chinese investors are particularly interested in upcoming onshore products being launched by overseas asset managers that give global exposure to liquid assets. There is also a growing focus on ESG offerings by foreign managers.

“With full foreign competition in China’s asset management industry becoming a reality, it has never been more important for players in the industry to understand the needs of Chinese investors and to have a robust communications strategy that responds to these sentiments and supports business expansion in the country,” Yu said.

Spotlight on ESG

As the interest in ESG investing rises in China, it is notable that a combined 95% of Chinese investors think that strong ESG product offerings are “very important” or “somewhat important” for overseas asset managers operating in the country, according to the survey.

ESG ranks the same as transparent fee disclosures (95%), followed by transparency in customer communications (94%).

In addition, just over half of Chinese investors (53%) believe the commitment of an asset manager to ESG is “very important,” with roughly another 43% saying it is “somewhat important” – making it the third most important factor when choosing an asset manager, the survey showed.

The credibility (61%) and performance (58%) of the asset management house continue to be the most important decision drivers.

Strong funds appetite

As Chinese investors continue to seek overseas asset managers’ products, there is interest in Qualified Domestic Limited Partner (QDLP) and private market funds, the survey showed.

The QDLP scheme allows licensed foreign asset managers to raise RMB-denominated sums from qualified individuals and institutions in China, with assigned quotas, to invest in offshore traditional and alternative investments. These include overseas equity and bond funds, hedge funds and real estate. The scheme was first launched as pilot in Shanghai in 2013.

The QDLP scheme continues to be a critical source of growth for asset managers, with the survey reaffirming the popularity among Chinese investors of funds in the scheme.

Part of the appeal stems from the differentiated diversification opportunity in investors’ portfolios.

The survey also shows that investors like the performance and investment strategy offered with QDLP more than they dislike high service fees.

The online survey polled 260 Chinese investment professionals in the second half of July 2021. All respondents to the survey self-identified as working in investment, finance or banking, and had traded or invested in at least one of the following: equities (95%), fixed income (89%), ETFs (88%), alternatives (57%), balanced funds (86%) or private equity funds (78%).

Part of the Mark Allen Group.