Manulife AM targets fresh QFII quota
Manulife Asset Management plans to apply for a second QFII quota this year and is currently considering its best approach, says the firm’s Asia chief Michael Dommermuth.
The firm has just fulfilled its initial $200 million Qualified Foreign Institutional Investor (QFII) quota, with $140 million allocated to a China A-share strategy and $60 million to RMB bonds.
It received its QFII licence from the China Securities Regulatory Commission in November 2009 and its quota from the State Administration of Foreign Exchange in June 2010. It cannot apply for an additional quota until a year after receiving its first.
Asked whether he would be looking to apply in June this year, Manulife AM’s president and head of Asia replies: “Correct.” However, he declines to reveal how much the firm might ask for, or what the composition of its application might be.
“We are evaluating what our options are now,” Dommermuth says. “But QFII is just one manifestation of the Greater China space. It also includes the CNH market, Greater China equities and Greater China fixed income.
“From our perspective, this is a strategically vital space for us to operate in and is one of the critical reasons why we made the acquisition of the 49% stake in Manulife Teda as well as acquiring Manulife Asset Management Taiwan.”
In March last year, Manulife acquired a 49% stake in Manulife Teda, a Beijing-based joint-venture asset management company. Manulife Teda was subsequently granted a $500 million Qualified Domestic Institutional Investor (QDII) quota. Manulife also has a long-standing life insurance JV in Shanghai, Manulife-Sinochem.
Dommermuth notes, proudly, that Manulife is one of only 12 companies in the world to have a footprint in the three Greater China locations – defining "footprint" as an established asset management company with a local investment team in each market.
At present, Manulife has 80 investment professionals on the ground in Greater China, with 24 in Hong Kong, 10 in Taiwan and 46 in mainland China.
It recently hired Ronald Chan from Pacific Eagle as head of equities for Asia to sharpen its suite of products. With reference to what the market might expect from Manulife in future, Dommermuth notes that Chan has experience in building investment teams in China.
Manulife’s RMB bond fund can invest in both the domestic onshore China market and also the offshore CNH bond market in Hong Kong.
Dommermuth points to the rise in CNH deposits and products as testament to a keen public interest in RMB, while he considers China’s domestic bond market to be a core competency for Manulife.
“In terms of the A-share fund, we fundamentally believe that local insight is critical for outperformance, especially for mid- and small-cap stocks,” he adds. “China is such a broad, deep and complex marketplace that local insight is especially important.
“So we felt the A-share fund best leveraged our equities team in Manulife Teda. We solidified that with a sub-advisory agreement with Manulife Teda for the A-share component of our QFII strategy.”
Manulife also recently launched the Jade RMB Savings Plan, a five-year maturity, single-premium insurance savings plan with capital protection and guaranteed returns in RMB.
On the back of its QFII quota, Manulife secured new agreements with retail distributors in Singapore, including Bank of Singapore and iFast, both of which target high-net-worth individuals and private banking clients.
One of the first investors to sign up was Air Canada Pension Investments, which awarded Manulife a $40 million mandate. Manulife will manage China A-share investments for this defined pension scheme with $10.5 billion in AUM.