Mark Li, Fullerton Investment Management (Shanghai)
After more than a year since the launch of its first onshore private fund in the mainland, Fullerton Investment Management (Shanghai), the wholly foreign-owned enterprise (WFOE) of Tamasek-owned Fullerton Fund Management, is mulling plans to expand its business, according to Mark Li, the WFOE’s Shanghai-based general manager and head of China sales.
Fullerton’s WFOE has a private fund management (PFM) licence, which enables foreign firms to launch China-focused private funds to onshore qualified investors in China, which include institutions and high net worth individuals. It obtained its PFM licence in September 2017 and launched an onshore equity fund in February last year.
It is also the only Singapore-based asset manager that has a private fund business in China.
Currently, Fullerton has 17 staff in Shanghai, which include nine investment professionals, Li told FSA. A majority of the investment staff focus on equities, with only two fixed income analysts.
“We are thinking of either adding a fixed income investment manager to prepare for a fixed income fund launch or other investment professionals for other capabilities, such as a multi-asset or fund-of-hedge-fund [manager],” he said, without giving details.
“It depends on market demand.”
The firm is also mulling plans to obtain a qualified domestic limited partnership (QDLP) licence, which enables foreign firms to raise money domestically to invest in offshore investments, with assigned quotas.
If obtained, the firm will join the likes of Blackrock, UBS Asset Management, Man Investments, Neuberger Berman and Value Partners that have adopted a “dual-track strategy”, in which they have both a PFM and a QDLP licence. Korea’s Mirae Asset was one of the latest to adopt such a strategy.
In total, there are around 20 QDLP licence holders and 15 PFM licence holders.
Fullerton is also looking to work with more distribution partners, according to Li.
At the moment, the firm only has brokerage firm China Galaxy Securities as its distribution partner.
“Managing a fund for more than a year has enabled us to be more confident and be in a solid position to pitch to other distributors,” Li said.
“We are in a much better position now compared to when we first launched the product because, at that time, we could only show our QFII and RQFII track record, which is not very directly related to [our onshore business].”
The qualified foreign institutional investor (QFII) and the renminbi qualified foreign institutional investor (RQFII) schemes are inbound investment programmes that allow foreign investors to invest in onshore securities, within allowable quotas.
Fullerton in Singapore has quotas of RMB 1.2bn ($180m) under the RQFII and $250m under the QFII schemes, according to data from the State Administration of Foreign Exchange.
The firm is now in talks with other distributors, including banks and securities firms, Li said, but declined to name them, noting that the firm will be sharing more details in due course.
Competition in the PFM space can be intense for foreign players, as there are around 24,361 private fund managers managing 75,248 PFM products with RMB 12.79trn in assets, according to data from the Asset Management Association of China (Amac). Of the total, there are only around 15 foreign PFM players.
“I don’t feel the competition against the other WFOEs – we are too small in [such a huge] market. But the competition comes mainly from the local PFMs because [the WFOEs] are fighting for the same distributors,” Li said.
As of June last year, only four out of 10 foreign PFMs were able to raise assets of at least RMB 100m . Li said that the firm has not yet breached the RMB 100m mark, but did not give exact numbers.