Global managers in onshore China fund push

Last month, Blackrock and Schroders launched onshore equity funds that primarily invest in China’s A-shares via their investment management wholly foreign-owned enterprises (IM WFOEs), according to Asset Management Association of China records.

The IM WFOE allows foreign managers to distribute onshore funds to a maximum of 200 domestic qualified (high net worth and institutional) investors.

The Blackrock fund, launched on 11 May, according to a filing to Amac (Chinese only). FSA sought further information on the launch of private securities fund but the firm did not respond in time for publication.

Turning to the Schroders fund, lead manager for the product is Jack Lee, the firm’s head of China A-share research. He is supported by the Greater China investment team, according to the firm’s statement. The research team for the private fund consists of 23 people, according to the filing, which  also shows that the firm’s Shanghai office has 14 licensed employees.

Lee also manages the Hong Kong-domiciled Schroders China Equity Alpha Fund.

Lee said in the same statement that an active and fundamental driven stock-picking strategy is the best approach to the A-shares market mainly due to market inefficiency. “Many of the best investment ideas [in China] have not been well-researched,” he said.

Using a bottom-up approach, the manager aims to invest in a concentrated number of stocks that are expected to perform well along with a macroeconomic growth.

The fund, incepted on 14 May, was launched about five months after the firm obtained its private fund management (PFM) license in December last year.

Growing foreign presence

Last month, Aberdeen Standard Investments (ASI) also launched an A-shares private fund in China investing in companies that provide consumer products, travel, wealth management and healthcare services.

Including ASI, Blackrock and Schroders, private fund products managed by foreign players totalled 13 to date. Additionally, UK-headquartered hedge fund manager Man Group has registered with Amac for the launch of its second private fund, according to Amac records.

Among 11 PFM licence holders, Italy’s Azimut is the only firm that has yet to launch an onshore product. Milan-listed Azimut obtained the PFM license in February this year, meaning that the firm will have to roll out at least one fund by the end of August at the latest because the authority places a six-month deadline for the first product launch to new license holders.

Stefano Chao, general manager for Azimut’s China operation, told FSA that the firm initiated discussions with clients to learn their investment needs after obtaining the license. He said the majority of them are from the institutional side and are more interested in fixed income products.

FSA found that a total of six firms have reported to Amac that they each gathered at least RMB 100m ($15.65m) for their private funds. The funds managed by Blackrock, Singapore-based Fullerton Fund Management, Invesco and Neuberger Berman have not yet surpassed the mark of RMB 100m in assets.

Source: Amac records on 7 June, 2018.

Source: FSA. * Chinese name only
# The fund is registered with Amac only and currently not for distribution