Global fund groups are first movers in mutual recognition
JP Morgan Asset Management, Invesco Hong Kong and HSBC Global Asset Management are the first three fund houses to have announced plans to participate in the Hong Kong-China Mutual Recognition Fund (MRF) scheme, which kicked off on July 1 when Hong Kong and China regulators started accepting fund applications under the program.
All three firms are partnering with their respective joint venture companies in China for this program.
JPMAM is partnering with China International Fund Management (CIFM), and both have already submitted their first applications for MRF funds.
At a briefing this morning (July 3) the SFC announced they have so far received applications from eight fund management groups for a total of 14 funds to be registered under the MRF scheme.
JPMAM will be CIFM’s representative in Hong Kong and will support the latter in marketing the approved funds to distributors and retail investors in Hong Kong. CIFM will likewise act as JPMAM’s local representative on the mainland. Shanghai-based CIFM is 49% owned by JPMAM and 51% owned by Shanghai International Trust.
In a statement, Michael Falcon, head of the Asia Pacific Funds Business for JPMAM, called the MRF scheme an important milestone in the joint development of both the Hong Kong and Chinese fund markets.
JPMAM has 30 Hong Kong-domiciled funds, the largest number amongst fund firms in Hong Kong, based on Morningstar information. It declined to say which funds have been submitted for regulatory approval.
Similar to JPMAM, Invesco Hong Kong is partnering with its joint venture Invesco Great Wall (IGW) and has submitted the application for an A-share focused mixed securities fund managed by IGW to the Hong Kong regulator.
“We are committed to being the early mover,” said Terry Pan, Invesco’s CEO for Greater China. Invesco has been appointed the distribution agent of IGW managed funds.
Over 20 of IGW’s mutual funds, representing 60% of its mutual fund AUM, will be eligible under the MRF criteria by end of this year. Invesco HK and IGW will focus on both A-shares equity and balanced strategies. Established in June 2003, Shenzhen-based IGW has US$11.08 billion in AUM as of March 2015.
Both JPMAM and Invesco Hong Kong will be relying on bank distribution to market their MRF funds to local investors.
HSBC Global Asset Management, meanwhile, has the advantage of having 100 retail banking branches as well as the branch network of Bank of Communications Hong Kong to distribute its MRF funds, subject to regulatory approvals.
HSBC GAM has announced that it is participating in the MRF scheme in partnership with its joint venture HSBC Jintrust Fund Management, which is owned 49% by HSBC GAM and 51% by Shanxi Trust Corporation.
It has submitted applications for two funds under MRF at this stage – an equity fund and a multi-asset fund managed by HSBC Jintrust – for distribution in the Hong Kong market.
Helen Wong, chief executive for Greater China at HSBC, said: “MRF will further cement Hong Kong’s position as the key investment centre for international and Hong Kong investors to trade Renminbi (RMB) products." But she declined to comment on expected demand from Hong Kong investors.
A few distributors interviewed by AsianInvestor have indicated that there won't be strong demand for MRF approved funds in the initial stages of the launch. There won't be a rush for these funds, according to Standard Chartered Bank. BEA Hong Kong is waiting for the right timing to participate in MRF fund distribution.
Diana Cesar, Head of Retail Banking and Wealth Management of HSBC in Hong Kong, said: “As Hong Kong retail investors look to diversify their portfolios to include RMB investments, MRF will provide an additional channel to invest into the mainland equity and bond markets through funds.