Value Partners launches its third onshore fund

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Hong Kong-listed Value Partners has launched another onshore China fund through its investment management wholly foreign-owned enterprise (IM WFOE). 

The firm won approval for its third onshore equity product Feng Tai-China A Share Fund 1, which was incepted on 6 July. It manages and distributes two other equity strategies onshore, the Value Partners Neo-China A Share Fund and the China A Share Jade Fund 1. The latter was launched on 2 July. 

All the onshore funds are managed by the Shanghai-based investment team, led by the firm’s investment director and head of China business Yu Xiaobo, according to the firm’s Hong Kong-based spokeswoman.

To date, a total of 14 foreign asset managers have registered with the Asset Management Association of China (Amac) as a private securities fund management (PFM) license holder. The licence makes a foreign firm eligible to raise funds domestically from professional (high net worth and institutional) investors for an onshore fund that invests in domestic assets. The regulator allows each private fund product to raise money from a maximum of 200 investors.

Among the license holders, Fidelity International is another firm that currently manages three onshore funds.

Fidelity kicked off the entry of foreign firms into China by becoming the first global manager to qualify to launch funds onshore in January 2017.

The IM WFOE program is therefore new. Foreign firms continue to take advantage of the opportunity, but in China’s large fund industry their numbers are still tiny.

Fourteen foreign managers out of 9000 are PFM licence holders, according to the latest statistics by Amac. The foreign managers have launched 16 funds aimed at domestic professional investors out of the 36,000 products available.

As foreign firm penetration is low, the brand recognition of each firm among domestic investors tends to be weak as well, according to Miao Hui, senior analyst at Cerulli Institute, who leads the China research initiative.

“Currently, domestic investors do not recognise much differentiation among different foreign managers due to unfamiliar names and a lack of a long track record of their firm and product.”

Foreign managers will continue to launch traditional long-only products to establish a track record as a reliable fund management firm, she believes. “The foreign firms would not risk damaging their reputation by launching some innovative yet difficult strategies.”

Foreign managers can also gain approval to sell products domestically that invest outside of China through the qualified domestic limited partner (QDLP) license.

Value Partners is among the first batch of 15 firms that registered as a license holder in 2015. The firm has rolled out two products, one investing in preferred stocks across Greater China and another in high dividend stocks in Asia-Pacific.

Additionally, the firm partnered with Hong Kong-listed private education provider China Education to establish a private equity fund last month. The fund invests in companies that are related to private vocational schools in China.

 

Source: Amac. * Chinese name only

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