Morgan Stanley and SEI to give product advice to Yinhua
Beijing-based fund house Yinhua has rolled out the most unusual arrangement in the QDII fund market to date.
BeijingÆs Yinhua Fund Management says it has signed up Morgan Stanley Investment Management and SEI Investments as product advisors to its first QDII launch. In a highly unusual move, Yinhua will work with the two international fund houses to launch a fund of funds product which, at this stage, will have a 40% allocation to Hong Kong equities and 60% to global markets.
The fund house first received its QDII license at the end of October 2007. The China Securities Regulatory Commission has since added another license for discretionary portfolio management under its belt û which will make YinhuaÆs QDII offering one of the first open to high-net-worth or institutional pockets in China.
YinhuaÆs spokesman in Beijing says the companyÆs goal has been to raise global investment and research capabilities when selecting external partners. The firm has already built a team of experienced investment professionals from around the world to run its QDII business. It hopes the external advisors will help it to strengthen the team and internal processes, so it will run these overseas investments independently over the long run.
William Cassidy, managing director at SEI Investments in Hong Kong, says as global markets move into a phase of volatility, Chinese investors are going to start demanding genuine value-added investment advice. ôThis skill is missing,ö he says. He believes the trend will cause a shake-up in the industry from investment managers adopting multi-manager solutions for æbest in classÆ investments.
Banks will also have to recognise the importance of fee-based income, which will be tied to their ability to retain assets. They need to transform from their present transactional models to a true open architecture for wealth management.
The dual-advisor arrangement will see Morgan Stanley act as a tactical asset allocation advisor, while SEI takes a lead portfolio manager role, says Tony Archer, managing director at Morgan Stanley Investment Management.
ôYinhua will be leveraging our experience in portfolio construction, manager selection and manager monitoring for global managers in every geography, in every asset class,ö Cassidy says. ôMore importantly, Yinhua has also asked SEI to provide on-going training, fund distribution services and support to assist them in successfully marketing and gathering assets in the fund."
ChinaÆs QDII programme has been on a respirator since the heady days of late-2007 when the first batch of QDIIs raised a staggering Rmb252.99 ($33.71 billion) in the space of just one month. Cassidy points to a narrow focus on æcheapÆ Hong Kong shares and the unfortunate timing of these funds as they were launched on the brink of the subprime fiasco.
ôThey (investors) are not getting burned by QDII. They are burned by the product diversification,ö he says. ôThey learned a lot of lessons very quickly.ö SEI is keen to provide an experienced pair of hands in China's fast-growing market, he says.
Yinhua was founded in 2001. As at the end of 2007, Yinhua had a total of Rmb92.3 billion ($13.2 billion) in assets under management, which makes it ChinaÆs 11th largest fund house with a 2.82% market share, according to Shanghai research house Z-Ben Advisors.
Previously, MSIM was also rumoured to have been negotiating a joint venture with Jutian Fund Management and an advisory deal with Dacheng Fund Management in Shenzhen. Archer declined to comment on these developments, but added the agreement with Yinhua is signed on a non-exclusive basis.
SEI Investments is a global provider of outsourced asset management, processing and operation solutions. Its 20 offices around the world manage $197 billion in assets for corporations, financial institutions, financial advisors and affluent families. The company also administers $426 billion in mutual fund and pooled assets worldwide.
The fund house first received its QDII license at the end of October 2007. The China Securities Regulatory Commission has since added another license for discretionary portfolio management under its belt û which will make YinhuaÆs QDII offering one of the first open to high-net-worth or institutional pockets in China.
YinhuaÆs spokesman in Beijing says the companyÆs goal has been to raise global investment and research capabilities when selecting external partners. The firm has already built a team of experienced investment professionals from around the world to run its QDII business. It hopes the external advisors will help it to strengthen the team and internal processes, so it will run these overseas investments independently over the long run.
William Cassidy, managing director at SEI Investments in Hong Kong, says as global markets move into a phase of volatility, Chinese investors are going to start demanding genuine value-added investment advice. ôThis skill is missing,ö he says. He believes the trend will cause a shake-up in the industry from investment managers adopting multi-manager solutions for æbest in classÆ investments.
Banks will also have to recognise the importance of fee-based income, which will be tied to their ability to retain assets. They need to transform from their present transactional models to a true open architecture for wealth management.
The dual-advisor arrangement will see Morgan Stanley act as a tactical asset allocation advisor, while SEI takes a lead portfolio manager role, says Tony Archer, managing director at Morgan Stanley Investment Management.
ôYinhua will be leveraging our experience in portfolio construction, manager selection and manager monitoring for global managers in every geography, in every asset class,ö Cassidy says. ôMore importantly, Yinhua has also asked SEI to provide on-going training, fund distribution services and support to assist them in successfully marketing and gathering assets in the fund."
ChinaÆs QDII programme has been on a respirator since the heady days of late-2007 when the first batch of QDIIs raised a staggering Rmb252.99 ($33.71 billion) in the space of just one month. Cassidy points to a narrow focus on æcheapÆ Hong Kong shares and the unfortunate timing of these funds as they were launched on the brink of the subprime fiasco.
ôThey (investors) are not getting burned by QDII. They are burned by the product diversification,ö he says. ôThey learned a lot of lessons very quickly.ö SEI is keen to provide an experienced pair of hands in China's fast-growing market, he says.
Yinhua was founded in 2001. As at the end of 2007, Yinhua had a total of Rmb92.3 billion ($13.2 billion) in assets under management, which makes it ChinaÆs 11th largest fund house with a 2.82% market share, according to Shanghai research house Z-Ben Advisors.
Previously, MSIM was also rumoured to have been negotiating a joint venture with Jutian Fund Management and an advisory deal with Dacheng Fund Management in Shenzhen. Archer declined to comment on these developments, but added the agreement with Yinhua is signed on a non-exclusive basis.
SEI Investments is a global provider of outsourced asset management, processing and operation solutions. Its 20 offices around the world manage $197 billion in assets for corporations, financial institutions, financial advisors and affluent families. The company also administers $426 billion in mutual fund and pooled assets worldwide.
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