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Chinese investors turn to specific QDLP products

Low correlation with Chinese equities and stable income are the two criteria mainland investors use to appraise QDLP products, according to Noah's William Ma.

“Although we are one of the biggest distributors of QDLP (qualified domestic limited partnership) products, we are essentially passive recipients of whatever types of funds international mangers choose to offer,” said Ma, the Hong Kong-based CIO of Noah Holdings.

Some managers are keen to showcase their flagship funds, which typically have conventional investment mandates, but they might be more successful if they tailored funds with strategies to meet the specific requirements of Chinese investors, he added.

The wild gyrations in Chinese stock markets during the past few years has created demand for QDLP funds that have a low correlation with China equity markets, and for funds that can promise stable returns.

The QDLP programme allows foreign managers to raise money in China, with assigned quotas, to invest in offshore traditional and alternative investments, including overseas equity and bond funds, hedge funds and property.

Niche strategies are already available, and Ma highlighted a Blackrock healthcare fund that Noah put on its distribution list. Other thematic products include agriculture and timber funds that were offered in response to direct enquiries from Chinese institutional investors, he said.

Noah’s QDLP clients are mainly family offices and high-net-worth individuals, said Ma. They tend to prefer offerings from well-established names with solid reputations, such as a Pimco product that Ma indicated is in the pipeline.

Separately, Ma is positive about the presence of global asset managers in the onshore markets. About 15 foreign managers have private fund manager (PFM) licences that allow them to offer domestic mainland products to professional investors in China.

“Quantitatively-based market-neutral strategies should gain traction as well as alpha-generating high frequency trading techniques,” Ma said.

Part of the Mark Allen Group.