Offshore arms of China fund firms develop taste for QFII
The offshore subsidiaries of mainland China managers have taken to adding QFII product to their RQFII funds to diversify their shelves and compete with foreign houses.
The trend became apparent in the latest batch of qualified foreign institutional investor (QFII) quota dished out by the State Administration of Foreign Exchange last month.
The offshore subsidiaries of China Southern Asset Management (CSOP), China Merchants Securities (CMS Asset Management Hong Kong), Guotai Junan Securities (Guotai Junan Assets Asia) and Taikang Life Insurance (Taikang Asset Management Hong Kong) each received $100 million.
Jack Wang, managing director of CSOP – the largest RQFII holder having received a total of Rmb16.1 billion in quota – says QFII products are very much part of its strategic plan and complement its RQFII offering.
“We want to broaden our product lines,” he tells AsianInvestor. “Aside from Rmb-denominated RQFII funds, US dollar-denominated QFII products can cater to the needs of different clients who want to diversify across asset classes.”
CSOP is understood to be planning to launch an equity fund domiciled in the Cayman Islands, using the CSI300 index as a benchmark. This will be an actively managed fund investing in blue-chip stocks, with fundraising expected to start in May and focusing on Asian and European institutions.
Meanwhile, Yuan Junping, managing director of Guotai Junan Assets (Asia), notes that its QFII product design is still a work in progress, but will target institutional investors via funds and segregated accounts. It is now communicating with investors.
The moves come after the China Securities Regulatory Commission relaxed the restrictions on asset allocation under its renminbi-denominated QFII scheme last month, as reported.
In what was dubbed RQFII 3, it removed constraints on asset allocation and gave managers flexibility to design and launch products in line with prevailing market conditions. It also expanded the range of tools an RQFII manager can invest in, to include index futures, listed options and the interbank bond market.
While this essentially brings RQFII and QFII closer together in terms of allowable investments, Chinese fund managers with RQFII licences confirm they are still eager to get QFII licences and quota to expand their offerings.
The four subsidiaries of China fund firms were among a total of 11 to receive QFII quotas last month, eight of which were Asia-based managers.
Taiwanese managers SinoPac Securities Investment Trust and First Securities Investment Trust were granted quotas of $100 million and $50 million, respectively, while Singaporean houses Lion Global Investors and New Silk Road Investment each received $50 million.
One thing that is noticeable, too, is that the process of quota approval has quickened considerably. CMS, Guotai Junan and Taikang Asset Management (HK) each obtained their quotas within a month of being granted licences. Previously the process had taken up to six months.
The other QFII holders awarded quota last month were US-based private equity firm IDG Capital Management Hong Kong ($60 million); US-based Cutwater Investor Services Corporation ($100 million); and Luxembourg based Generali Fund Management ($100 million).
Overall the 11 QFII holders received $910 million in quota last month, taking the total to $41.75 billion awarded to 197 QFII holders as at the end of March.