Distribution hurdles
The firm had no difficulty in obtaining a PFM licence, Li said. “We just followed the steps stated by the AMAC. We prepared our documents, followed the instructions and submitted the application for them to review,” he said. “We attended their interviews and we got our licence.”
Setting up its domestic capabilities was not burdensome either, given that the firm already had investment management research staff in place.
“It was only a matter of whether we can find people for other functions, such as sales, compliance and trading, which are the basic functions that we needed to launch an onshore product,” Li said.
However, Li admitted that launching a fund and finding an appropriate distribution channel may be a hurdle for new foreign asset managers.
“The biggest challenge is setting your strategy, deciding which product you are going to launch and with whom you are going to launch the product,” he said. “Since this is a private fund, you cannot just put out any marketing programme because it is targeted to high-net-worth individuals.”
Finding a distributor is also a challenge. “Your business partner should be willing to work with you and you have to establish a common strategic mission for both parties and agree on specific details, such as how to launch the product.”
Fullerton has partnered with a local distributor, which Li declined to name, to launch the equity fund.
Li believes the firm can use its background to differentiate itself from the 20,000 private fund managers that are in the domestic industry.
“We are a WFOE with a private fund licence, we’re not like a local private fund manager, we are not a joint venture fund house and we are not a local fund house,” he said. “We focus on our market expertise, our risk controls, investment philosophies, capabilities and track record. These are the elements that we have been using in our roadshows to potential distributors.”
QDLP licence
Besides its PFM licence, the firm is also looking at applying for a qualified domestic limited partnership (QDLP) licence from the regulators, according to Li.
The QDLP programme allows foreign asset managers to raise up to $100m of domestic capital from professional investors who want to invest in offshore products. Examples of firms that have this quota are Blackrock, Man Group and UBS Asset Management.
“The QDLP is definitely something we are looking at, but the QDLP quota in Shanghai has been almost used up, so we have been contacting the local authority to explore the feasibility of applying for a QDLP licence.”
