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Onshore WFOE approvals speed up

While more investment management wholly foreign-owned enterprise licenses have been approved by China recently, some fund managers are way ahead.
Fund Selector Asia

Allianz, Mirae and Neuberger Berman have become the latest fund houses to grab an investment management wholly foreign-owned enterprise license (IM WFOE).

But when they will actually start the operations and launch products for qualified onshore investors remains in question, as UBS Asset Management pointed out earlier.

However, Sandra Lu, partner of Llinks Law Offices, expects that by the end of the first quarter next year the first IM WFOE registering as a private securities fund manager through the Asset Management Association of China (AMAC) – a functional step before the firm can launch onshore equity and fixed income-focus products to institutional clients and high net worth investors onshore.

Speaking at a panel of the Hong Kong Investment Funds Association Annual Conference on Tuesday, she said that in the past six months, AMAC saw some 20 foreign fund houses show interest in setting up an IM WFOE.

Alex Boggis, managing director at Aberdeen International Fund Managers, said “the firm is still waiting for absolute clarity what structure the WFOE needs to be to do both [investment management and be a Qualified Domestic Limited Partner].

“We will be disappointed if we don’t have it within the first six months of next year.”

The Qualified Domestic Limited Partner (QDLP) type of WFOE has been granted to about 15 hedge funds, private equity firms and asset managers to sell offshore products with designated quota to non-retail investors in China. But issuance has stopped since October last year, after the government clamped down on capital leaving China.

Aberdeen has put six people on the ground for the IM WFOE and is looking at the fund managers at the moment – possibly there will be one to two fund managers relocated to the Shanghai office, with additional new hires, he noted.

“It’s still early days. How we actually do that, and what we sell, it’s a good question.”

UBS AM, which already secured the QDLP license, expected to merge the IM WFOE with the QDLP one by first half of next year, and launch products in the second half, as reported earlier.

Allianz Global Investors’ license also has business scope including asset management, the second asset manager after JP Morgan Asset Management to include that, although the definition is still unclear.

The German fund management firm so far does not have a physical onshore presence in China, a spokeswoman said. “At present, Chinese investors are accessing our investment solutions via the QDII route,” she added.

The qualified domestic institutional investor (QDII) allows onshore institutions to invest offshore through designated quota, although there has been no new issuance since March 2015.

Allianz GI’s parent, Allianz Group, owns a 49% stake in Guotai Junan Allianz Fund Management.

Neuberger Berman declined to comment. Mirae did not immediately respond to request for comments.

Z-Ben Advisors, a consultant, said the past week has seen 9 new IM WFOEs established, and expected the number of double shortly.

Part of the Mark Allen Group.