Fidelity leads the WFOE race

Fidelity’s WFOE launched its first equity fund and added a new fixed-income fund, bringing to three the number of products it offers to Chinese domestic qualified investors and further establishing its leadership among foreign peers.

Fidelity’s newly-launched China Equity No. 1 Private Fund will be managed by Lynda Zhou, equities portfolio manager at Fidelity International.

Zhou, who is based in Shanghai, said in a press release that the fund would invest primarily in China’s onshore equity market. Managed by the local team, the fund will aim to identify unrecognised investment opportunities within the market from a long-term perspective, she added.

Fidelity’s new fixed income fund, the China Bond Opportunity No. 1 Private Fund, will be managed by Freddy Wong. He already manages the firm’s China Bond No.1 Private Fund, which was the first ever private fund product launched by a foreign firm in China, available for sale since May 2017.

Fidelity is the pioneer in adopting the IM WFOE structure to enter China’s domestic asset management industry. It was among the first batch of foreign firms to establish a WFOE in Shanghai in 2015. It was then the first foreign asset manager to register as a private securities fund management company with the Asset Management Association of China (AMAC) in January 2017. Now it offers the highest number of products compared to other IM WFOEs.

WFOE newcomers

In what is quickly becoming a busy space, two other global investment managers, BlackRock and Schroders, have announced they registered private fund management (PFM) licences with the AMAC on 25 December. Aberdeen Standard Investments (ASI) obtained the licence from the AMAC earlier last month.

Foreign investment managers are required to set up a WFOE in China in order to become eligible to apply for the PFM licence. The licence allows the managers to launch fund products to domestic qualified investors – high net worth individuals and institutional investors.

Once the licence is granted, the manager faces a six-month deadline before which it must launch its first product. It means that the WFOEs of ASI, BlackRock and Schroders will have to roll out their first onshore funds by June 2018.

ASI plans to launch an equity fund with a focus on bottom-up stock selection as its debut product, a Hong Kong-based spokeswoman for the firm told FSA. Spokeswomen at BlackRock and Schroders declined commenting on product launch plans at this stage.

Ten foreign firms have obtained PFM licences, out of at least 22 IM WFOEs that have been established in China so far. However, only Fidelity International, UBS Asset Management and Man Investments have launched investment products. Fullerton has plans to launch an equity fund and Neuberger Berman plans to launch a fixed income fund, FSA reported earlier.

Source: FSA