Justin Chan, CIO, Overseas Chinese Investment Management
How does an ambitious Chinese asset management firm expand offshore if it is too small to qualify for schemes such as the Qualified Domestic Institutional Investor (QDII), which requires minimum assets RMB 20bn ($3.18bn)?
According to Justin Chan, CIO of mainland-owned Singapore firm OCIM, the answer was to establish a foreign subsidiary in Singapore, build up an offshore fund management business and wait for China’s restrictions on capital outflows to ease.
China will gradually reduce its capital controls, Chan told FSA. “It won’t be overnight, but right now we have to position ourselves for the future.”
Parent firm, Hangzhou-based OCFM, was established by the Zhejiang Federation of Returned Overseas Chinese, receiving a private investment fund management licence from the mainland regulator in July 2014. Today, the parent firm has equity and fixed income funds and manages $2.5bn with a staff of 300, according to materials provided by the firm.
OCIM, the subsidiary, was established in Singapore in 2014 as an asset management firm, licensed and regulated by the Monetary Authority of Singapore. The firm’s initial intention was to target mainland investors who want offshore exposure.
The obstacles resulting from China’s capital controls, however, made it an unfeasible business proposition, according to Chan, and OCIM revamped its strategy to target offshore capital. Today, it caters to clients in Singapore, Hong Kong and mainland Chinese who already have money offshore.
The firm is in the process of establishing a portfolio of funds independent of its parent. So far, it has launched five Cayman-domiciled hedge funds, with total AUM around $30m, which are sold to clients outside of China. The strategies include global macro, equity long-short, multi-asset, a fund-of-funds and the newest, technology-oriented OC Horizon.
The OC Horizon strategy, managed by Chan and John DeCleene, was launched in November 2017. It was conceived as an umbrella for technology-focused investments, on the theme of the “future of humanity”.
The strategy holds 35% of its assets in crypto-currencies, according to its fact sheet, and 50% in equities (the rest is in cash and “other” assets).
“We have been focusing on non-financial blockchain applications,” Chan said, in particular alternative “coins” linked to real-life applications. One example Chan mentioned is Vchain Technology, which aims to provide digital verification of passenger data for airlines. Another is Neo, a mainland company that developed blockchain technology with smart contracts − similar to the well-established Ethereum.
Chan has his eyes set on other themes for future technology-focused funds, such as biotech, energy and robotics.
“Our job is to develop a good record in terms of compliance and regulation and develop our brand name overseas,” Chan said. “When [China’s capital control regulations] change, there will be a floodgate of assets coming out and we will be in the best position.”