The PFM licence clears the way for UBS AM’s wholly foreign-owned enterprise (WFOE) to bring China-focus equity, fixed income and multi-asset products to high net worth and institutional investors.
“The idea is to leverage our existing strong China capability,” Rene Buehlmann, head of UBS Asset Management for Asia-Pacific, told FSA.
“We can bring a different style to manage China equities onshore,” he said. “On the fixed income side we want to provide income products that are particularly relevant to international players who have cash and liquidity needs in China. We will also look into bringing the multi-asset capability.”
UBS is considering leveraging the strategy developed by Bin Shi, the Hong Kong-based portfolio manager of the UBS (Lux) Equity China Opportunity Fund and the UBS (Lux) Equity Greater China Fund, Buehlmann noted.
Although the timeline of the product launch will depend on client needs, “needless to say, we are trying to bring these products to the market as soon as possible,” he added.
“Our approach is to get all the capabilities ready, rather than establishing one first and then wait to build the others,” said Aries Tung, head of strategy and business development for China at UBS AM.
“We have to maintain the style of the strategy and the way we run the portfolio in line with UBS standards,” he said. “We will build that into the Shanghai office, and the team will work with Shi very closely to deliver the products,” he noted, adding that the company planned to keep its options open and not fixating on one strategy.
Multipronged approach
UBS AM merged its two WFOEs to gather both the PFM and QDLP functions under one roof earlier this year. The former allows the firm to launch non-retail funds that invest in secondary markets, while the latter can raise onshore money from non-retail investors to buy offshore products given the quota granted by the Chinese authorities. The firm has used up the $100m quota granted in March 2015.
The firm also has a mutual fund joint venture in the mainland, the UBS SDIC Asset Management set up in 2005, in which it holds a minority stake.
Tung said the WFOE setup would focus on high net worth and institutional investors, offering products that have lower turnover, as well as stronger focus on risk management and broader asset allocation. This approach differs from that of UBS SDIC AM, which offers mutual funds to retail investors.
Besides the WFOE and the joint venture, UBS AM has also planned to join the mutual recognition of funds (MRF) program to sell its Hong Kong-domiciled funds to mainland retail investors. It introduced two such funds in the SAR two months ago.
“The local WFOE offers much more potential than MRF,” noted Tung. Participation in the MRF scheme involves a number of processes and imposes restrictions on AUM raised onshore, he added. “For WFOE, it just depends on how good you are in the market.”
UBS AM is the second foreign firm, after Fidelity, to be approved for launching fund products in China under the WFOE asset management structure. Fidelity introduced a China bond fund through its WFOE two months ago.
At least a dozen other foreign asset management firms have set up investment management WFOEs in Shanghai, most recently BNY Mellon, Vanguard and Invesco. They need to obtain PFM licences from the Asset Management Association of China (AMAC) before they are allowed to launch products.
