The issues not only confront new entrants, but also those that already have an asset management joint venture in China.
Lin said local players believe the fund management business is “a great business”, and thus foreign firms with joint ventures must convince the management of the partner firms to accept a majority ownership.
“I don’t think that most of the local shareholders would give up control in their joint venture,” he said.
UBS, which owns 49% of UBS SDIC Fund Management in China, with the remainder owned by SDIC Taikang Trust, has no comment on the possibility of taking a majority stake, said René Buehlmann, UBS Asset Management’s Hong Kong-based Asia-Pacific head and global head for wholesale client coverage, who spoke at a media briefing in Hong Kong yesterday.
“At this stage, we feel comfortable with how we are organised,” he said, adding that besides the joint venture, the firm also has a private fund management (PFM) licence and has quotas under the qualified domestic limited partner (QDLP) scheme.
PFM route
A PFM licence enables foreign firms to distribute onshore products to domestic institutional and high net worth investors, while the QDLP programme allows foreign firms to raise domestic investor capital to invest offshore.
To get a PFM licence, managers first establish an investment management wholly-owned foreign enterprise (IM WFOE) and then apply for the licence from the Asset Management Association of China (AMAC). Once the licence is approved, the firm has six months to launch a product in China.
Vanguard, which does not have a joint venture, has an IM WFOE, but has not applied for a PFM licence, according to Lin. The firm is still evaluating opportunities for its IM WFOE and is hiring more local people on the ground, he said. It now has eight people for its WFOE and is building relationships with current and prospective clients.
Lin also indicated that Vanguard is warm to the idea of taking majority ownership of a mainland asset manager.
“It would provide opportunities for foreign managers like Vanguard to be able to launch a locally- domiciled product in China, but we are still waiting for more clarity on the regulation.”
