HFT in Valentine's Day split with partner on flagship QDII fund

Valentine’s Day is a particularly bad day for a break-up, but that’s just what happened between HFT Investment Management and BNP Paribas Investment Partners BE Holding.

HFT announced that as of yesterday it had terminated an investment advisory agreement with the foreign partner for its China Overseas Equity QDII fund. BNP Paribas Investment Partners had served as adviser on the fund since inception in June 2008.

HFT a joint-venture between Haitong Securities, which holds 51%, and BNP Paribas Investment Partners (49%), formerly known as Fortis Investment Management. BNPP IP took over the shares from Fortis Investment in April 2010.

An HFT spokesman says the firm has improved its research and investment capabilities in overseas-listed China stocks to the point that it no longer requires a foreign adviser.

Asked how it viewed the termination of this relationship, a spokesperson for BNP Paribas Investment Partners says: “This is a pure administrative change. It will not affect our corporate and day-to-day relationship. There will be no impact on investors’ confidence in the QDII fund.”

Similarly, HFT's spokesman says he does not expect the absence of a foreign adviser to impact investor confidence.

“This January we did not employ a foreign adviser when launching the second QDII fund, HFT Greater China Equity Fund, even though it covers a wide geographic region compared with the first one. This didn’t affect the fundraising,” he says.

He notes that HFT will maintain close communication with its foreign shareholder BNPP IP, and does not rule out the need to employ a foreign adviser for QDII fund investment in global markets or non-China asset classes in future.

A spokesperson for BNP Paribas Investment Partners adds: “We are currently working closely with HFT on developing other global QDII products.”

Meanwhile, HFT will continue to provide advisory services to BNP Paribas Investment Partners on its QFII funds, which include seven Flexifunds investing in equities, money market and short-term bonds, and Primera Equity China B.

Among the 30 QDII funds, HFT China Overseas Equity has recorded the best performance, outperforming the benchmark by 7.49% in the fourth quarter of 2010. As of February 10 this year, its accumulative net asset value of 1.6640 ranks second, narrowly behind BOCOM Schroders Global Select Value Fund (1.6660).

China’s asset management industry is notorious for a high turnover rate of fund managers, although HFT says it prides itself on maintaining a stable investment team for its China Overseas Equity QDII fund.

Chen Hong, HFT’s chief investment officer, and his foreign partner, William de Vijlder, have worked together since the fund’s inception. Yang Ming, HFT’s portfolio manager, joined to co-manage the fund last January.