Schroders in onshore product launch

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After launching three private fund management (PFM) products in May this year, Schroders has added another, timing it with expected foreign capital inflows.

Schroder Investment Management in Shanghai, the firm’s wholly foreign owned enterprise (WFOE), said it has debuted the China Multi Asset Dynamic Allocation FOF No.1 product, according to a statement from the firm.

The move followed the launch of three onshore funds in May 2019. The firm’s first onshore fund, the PFM China Total Return Zhihui No. 1 Fund, was introduced in 2018, according to the statement.

It now manages five PFM products, but remains behind Value Partners and Winton Capital, which have been more aggressive with their mainland product strategies. A PFM licence allows foreign managers to develop and sell funds investing in onshore assets to domestic qualified investors.

FSA contacted the firm for more information but officials declined to comment.

The fund is managed by Shanghai-based fund manager Evan Zhou, with support from the local research team and the global multi-asset team. The statement said that sales will target China’s high net worth and institutional investors.

“Looking at recent market developments, ongoing global trade tension has caused Chinese A-shares to recede, but this has presented a buying opportunity of selective names for mid- to long-term allocation. Risk aversion has driven down Chinese bond yields, but Chinese sovereign bonds offer relatively attractive yield and valuation as we enter a new round of global monetary easing,” said Zhou in the statement.

“Overall, we remain positive but cautious on China’s economic outlook as stimulus measures continue to support growth. Against this mixed backdrop, a multi-asset strategy could be an appropriate investment approach for investors to consider,” Zhou added.

Schroders also has a joint venture fund management firm with Bank of Communications, BOCOM Schroders. Last year, it launched an Asia-themed multi-asset income fund in China via the Hong Kong-China Mutual Recognition of Funds scheme, FSA previously reported.

Earlier this month, the firm said in a press release that it entered into a long-term strategic agreement with Bank of Communications for distribution, management and development of products in asset and wealth management.

Schroders declined to comment on what role, if any, the joint venture partner is playing in the most recent launch.

Rising onshore competition

As of 9 August this year, 21 foreign firms hold a PFM licence and collectively they have launched 46 products with RMB 5.4bn ($756m) in assets, according to a statement from the Asset Management Association of China (Amac).

Other foreign asset managers are also ramping their business in China.

Germany-based Allianz Global Investors recently registered its first PFM product, FSA previously reported.

In August, Hong Kong-based Value Partners registered its seventh PFM product, making the firm the asset manager with the largest number of PFM funds. UK quant fund manager Winton Capital runs six PFM products.

Italian asset manager Azimut‘s new product, An Zhongxin Mix 2 Private Fund, also received approval from the Amac in August.

The product launches are against the backdrop of a gradual relaxation of onshore fund rules, which are part of the overall effort to open China’s financial markets to foreign players.

Additionally, A-share inclusion on the global indices of leading index providers is widely expected to result in more foreign capital flowing into China, buoying domestic markets.

On 10 September, China officially abolished the quota restrictions of the qualified foreign institutional investor (QFII) scheme and RQFII, its renminbi equivalent.

The action could support foreign inflows from index inclusion by enabling more direct purchases of mainland stocks. Officials from China’s State Administration of Foreign Exchange (Safe) said it will greatly enhance the convenience of foreign investor participation in the domestic financial market, FSA previously reported.

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