Schroders to debut another onshore FOF

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The firm expects to launch a second fund of funds onshore in China.

The Schroder China Diversified Income No. 1 FOF Private Security Investment Fund received approval from the Asset Management Association of China (Amac) on Monday, to be sold to China’s institutional and professional investors, according to the regulator’s record.

The move follows the launch of its another FOF onshore product last month, the China Multi Asset Dynamic Allocation FOF No.1 product.

The UK-based asset manger now manages six private fund management (PFM) products, second to Hong Kong-based Value Partners, which has seven onshore funds in total.

UK quant fund manager Winton Capital also runs six PFM products.

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.

Schroder Investment Management in Shanghai, the firm’s wholly foreign owned enterprise (WFOE) first launched an equity fund – the PFM China Total Return Zhihui No. 1 Fund  in 2018. In May this year, the firm launched another three onshore funds in China.

The Shanghai WFOE has 26 staff and the registered capital is $24.7m, according to Z-Ben Advisors.

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.

In early September, 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.

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 Amac.

Last month, Germany-based Allianz Global Investors registered its first PFM product.

China opening

The new product comes 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.

Also on Monday, China officially set a specific timetable for the abolishment of investment limitations for foreign fund management firms that own a joint venture stake in Chinese retail mutual fund companies. The restriction will be officially lifted on 1 April 2020.

Similarly, investment limitations for securities companies will also be lifted in December next year.

Last month, 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 said it will greatly enhance the convenience of foreign investor participation in the domestic financial market, FSA previously reported.

On the other side, foreign players are welcoming the country’s continuous efforts.

In the same month, S&P has released a list of A-shares to be included on its EM index, building momentum for passive inflows, following similar moves from the MSCI and FTSE.

Eligible companies trading on the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect have been included, according to an S&P spokeswoman.

The firm also noted that A-shares are expected to represent a weighting of 6.2% in the S&P Emerging BMI while China as a whole (to include offshore listed) is expected to represent a weighting of 36%. At the end of September, the total China weighting was 35.3%, with an increase of 3.3% in September.

 

 

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