Fidelity to apply for public licence in China

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The firm has created a new China role as it prepares to transition its private fund management (PFM) business to a public asset management firm.

Fidelity has appointed Daisy Ho as president for China, where she will be responsible for the overall leadership and management of the business, investment and operations, according to a statement from the firm.

Ho is currently the firm’s Hong Kong-based managing director for Asia (ex-Japan) and the Middle East – a role she has held since 2016. She joined the firm in 2005 as head of relationship management for the institutional business in Hong Kong and then became the head of institutional business for Asia (ex-Japan).

Ho will assume her new role in January and will relocate to Shanghai.

A Sydney-based Fidelity spokeswoman said there will be no direct replacement for Ho’s managing director role, noting that the firm has a team in the region led by Rajeev Mittal, managing director for Asia-Pacific (ex-Japan).

Fidelity describes Ho’s new role as “critical” as the firm is preparing for its full transition to a public asset management company in China from just being a private fund manager. Establishment of a domestic asset management company will enable the firm to offer products to the retail investor base.

Fidelity’s China business

Fidelity’s move follows a series of regulatory changes that will allow foreign firms to set up public mutual fund companies in China. Earlier this year, for example, Chinese regulators said they will permit foreign managers holding a PFM licence to convert their businesses into a public fund management company, but did not set a date.

Fidelity intends to file an application when regulators give the green light, the spokeswoman said.

However, she did not provide details on future plans.

Fidelity is among the first batch of foreign firms to establish a wholly foreign-owned enterprise (WFOE) in China in 2015. It was also the first foreign manager to obtain a PFM licence from the Asset Management Association of China (Amac) in 2017, enabling the sale of onshore funds to China’s qualified investors. So far, the firm has launched four onshore private funds.

About half of Fidelity’s 50 staff in its Shanghai-based WFOE are on the investment side, according to the spokeswoman. The firm also has staff based in Beijing and Dalian.

The firm also intends to participate in the Hong Kong-China Mutual Recognition of Funds (MRF) scheme. In December, it lodged an application with the China Securities Regulatory Commission for its Hong Kong Equity Fund and Asia Pacific Equity Fund to be distributed in China via the MRF, according to the regulator’s records. The funds are still being reviewed by the CSRC.

Regulatory changes

As of the end of June, a total of 21 foreign managers held PFM licences in China, of which 16 have launched a total of 38 onshore funds, according to a Cerulli Associates report.

Last month, China’s securities regulator also announced that the foreign ownership limit in a joint venture with Chinese mutual fund companies will be officially lifted in April 2020.

A number of foreign firms in domestic joint ventures are set to increase their investments to hold a majority stake.

One of them is JP Morgan Asset Management, which, in August this year, paid $35m for an additional 2% holding in its joint-venture, China International Fund Management, taking its stake up to 51%.

Invesco has also moved towards majority control of its Shenzhen-based Invesco Great Wall Fund Management joint venture. Morgan Stanley and HSBC are also rumoured to be preparing to assume control over their joint ventures.

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