Zeal AM and New York-headquartered Two Sigma Investments have become the latest asset managers to obtain an investment management wholly-owned foreign enterprise (IM WFOE) licence in Shanghai, according to records from the Shanghai Administration for Industry and Commerce.
Having an IM WFOE enables foreign managers to apply for a private fund management (PFM) licence from the Asset Management Association of China. With a PFM licence, foreign firms can manage onshore domestic funds and sell them to China’s institutional and high net worth segments.
Momentum for the onshore structures is picking up. The two firms join at least 50 foreign managers with a WFOE licence. Of those 50 firms, around 13 have obtained a PFM licence and have launched 20 onshore funds as of the end of October.
WFOE landscape (as of August 2018)
Zeal AM prepares
With the IM WFOE, Zeal AM is planning to obtain a PFM licence, according to William Shek, Hong Kong-based head of marketing and investor relations.
“We are currently in the preparatory stage to get a PFM licence,” Shek said, but he did not elaborate.
“This is part of our plan to penetrate the China market on the back of the first step of having a fund participate in the Hong Kong-Mainland Mutual Recognition of Funds (MRF) scheme,” he said.
The Zeal Voyage China Fund, which is an equity fund that invests in stocks listed in Hong Kong, Shanghai and Shenzhen, is one of the first Hong Kong-domiciled MRF-approved funds to be sold in the mainland.
Two Sigma uses big data applications in the investment process in some strategies, according to the firm’s website.
FSA sought more information from the firm about its IM WFOE licence, but officials declined to comment.
Two Sigma has an office in Hong Kong, with a dealing in securities (Type 1) licence that the firm obtained in 2014, according to records from the Securities and Futures Commission. With the licence, the firm is able to sell mutual funds for clients in Hong Kong.
The firm does not have SFC-authorised funds, however, SFC records show.
It also has offices in Tokyo, the US and the UK, according to the firm’s website.