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UBS AM adds two more onshore products

UBS Asset Management continues to introduce onshore funds against the background of strong market volatility and imminent global recession.

The UBS (CN) China Yufeng Fixed Income Bond Strategic Series 3 Private Securities Investment Fund and the UBS (CN) China Customized Equity Private Securities Investment Fund Series 1 received approval from the Asset Management Association of China (Amac) yesterday, according to Amac’s records.

This move comes after the firm’s Shanghai-based wholly foreign-owned subsidiary (WFOE) received approval from the Amac for its four PFM products in February this year.

Having a PFM licence enables foreign entities to develop and sell funds investing in onshore assets to domestic qualified investors, which include institutional and high net worth investors.

In total, UBS AM manages 15 PFM products, which is the largest number of any foreign firm. According to Z-Ben Advisors, its Shanghai WFOE has 32 staff and registered capital of $30.5m.

The China Yufeng Fixed Income Bond Strategic Series 3 Private Securities Investment Fund is managed by Shanghai-based Brian Lou and the China Customized Equity Private Securities Investment Fund Series 1 is run by portfolio manager Zi Zheng Wang, also based in Shanghai, a spokeswoman for the firm told FSA.

The bond fund will be sold to high-net-worth clients via a distribution partner, according to Lou, but he declined to name the partner.

The equity product is distributed via the wealth management department of UBS Securities and also targets high-net-worth clients, according to Wang.

“The two products have been launched already, but the fundraising continues,” Adrian Chen, the WFOE’s Shanghai-based general manager told FSA.

China underinvestment

Chen said he is not concerned about the strong market volatility worldwide, which is set to continue. “As the global epidemic escalates, the economic impact is inevitable. However, [the April resumption of work in] China also gives us hope that the outbreak can be controlled and slowed down. And hence this crisis too shall pass.

“And while markets have understandably reacted negatively, that should not make us ignore the structural trends in China and emerging markets, and how some of these are accelerating and creating long-term investment opportunities.

“There is a compelling case for a dedicated strategic allocation to China,” he said.

“China equity and fixed income offer very large hunting grounds for alpha and yield and the world remains very underinvested in both.”

The firm has more PFM products planned for 2020, he added.

UBS AM also manages one qualified domestic limited partnership (QDLP) product, the A&Q (China) Neutral Alpha Strategy Leverage Fund, according to Amac records.

The QDLP scheme allows foreign managers to raise money in China, with assigned quotas, to invest in offshore traditional and alternative investments, including overseas equity and bond funds, hedge funds and property.

Hong Kong-based Value Partners has the second largest number of onshore funds via the PFM licence. Yesterday the firm received approval from the Amac for its tenth onshore product, the Value Partners China Zhongrui Hugangshen No 1 Private Securities Investment Fund,

Last week, Value Partners was greenlighted for its China Jingdu Private Securities Investment Fund.

FSA contacted Value Partners but the firm declined to comment.

There are 26 foreign PFM licence holders which together have launched 78 onshore funds, with total AUM of RMB 7.88bn ($1.11bn) as of the end of 20 March, according to a statement from Amac.

Several asset mangers have obtained the PFM qualification this year, including Income PartnersRussell InvestmentsSchroder Adveq and BEA Union Investment.

Separately, as of 1 April, the investment limitation for foreign fund management firms having a joint venture stake in Chinese retail mutual fund firms has been officially lifted.

Part of the Mark Allen Group.