JP Morgan AM targets QDII for China growth
The new head of Hong Kong and China retail business at JP Morgan Asset Management, Eddy Wong, is prioritising the mainland's QDII market for growth via foreign bank distributors.
Wong, promoted internally from Hong Kong head of intermediary business only last month to replace Terry Pan, is also in the hiring markets to fill his old role, he tells AsianInvestor. Pan now heads Greater China at Invesco, as reported.
Pointing to growing appetite for offshore exposure among Chinese investors, Wong said JP Morgan AM was eager to get more funds on the shelves of foreign banks to tap demand for qualified domestic institutional investor (QDII) product.
A total of $13.5 billion in QDII quota has been handed out to banks, $10.75 billion of it to foreign banks, although the utilisation rate of that $13.5 billion only stands at 72%. The top QDII distributors in China are HSBC, Citi, DBS and Standard Chartered.
JP Morgan AM has distribution partnerships with both local and foreign banks, but aims to prioritise the latter as they have the majority share of the QDII market.
“We are now talking to some of these banks,” Wong said. “We will ride on our relationships with bank distributors here in Hong Kong to build our retail business in China.”
He declined to name the banks JP Morgan was in talks with or disclose the present size of its QDII business and growth targets.
Apart from the big distributors, smaller banks such as ANZ are also becoming active in QDII. ANZ was granted an additional $300 million QDII quota last October.
January Sun, consultant for Shanghai-based Z-Ben Advisors, pointed out that while it had been relatively easy for foreign managers to partner banks on QDII, what had been challenging was finding good distributors to boost asset size.
“Because QDII quota is under-utilised, there’s room for demand to grow," she confirmed. "Therefore foreign managers are competing for the remaining un-utilised quota and potential demand, making the distribution channel more crowded.”
Citing a 2014 cross-border capital flow report from China’s State Administration of Foreign Exchange on February 15, Sun noted how QDII investors had been allocating substantial sums to higher risk assets such as stocks and mutual funds, above fixed income funds.
The breakdown for QDII asset allocation last year was 50% to stocks (6 percentage points down on 2013), 23% to mutual funds (1ppt increase), 19% to other assets including gold, oil, real estate (6ppt increase) and 8% to fixed income (1ppt decline from 2013).
Separately, Wong said that following his promotion JP Morgan AM was now seeking a replacement as head of intermediary business for Hong Kong. He said he was considering internal and external candidates.
But one senior recruiter told AsianInvestor that finding an experienced distribution head would be challenging since they were in great demand and many had been snapped up already by new entrants, mainly European and Chinese firms that had set up in Hong Kong in recent years.
JP Morgan AM’s AUM sourced from Asia stood at $131.7 billion at the end of 2014, down slightly from $133.6 billion in 2013, according to AsianInvestor's latest list of Asia's top 100 fund firms by assets. Wong declined to provide its AUM sourced from the Hong Kong and China retail markets.