Long time no see China AMs fight for offshore influence August 19, 2013 Share From Anita Davis A group of Chinese asset management companies aims to lobby Beijing to boost their competitiveness in the offshore renminbi market, hoping to stay ahead even as more global fund managers gain access to the onshore market. Chinese asset management companies are searching for ways to keep their edge in Hong Kong’s offshore renminbi market as competition from global fund managers intensifies as China’s security regulator increases its quotas for qualified foreign institutional investors (QFII) and renminbi qualified foreign institutional investors (RQFII). A group of 23 Hong Kong-based Chinese asset management firms reportedly launched the Chinese Asset Management Association (HKCAMA) of Hong Kong in July in a bid to lobby Beijing on ways to boost their competitiveness offshore, wrote the South China Morning Post on August 12. Firms including China Asset Management, CSOP Asset Management, E Fund Management and Haitong Asset Management are reportedly among the participating funds. The association, which is led by founding chairwoman Ding Chen, chief executive of CSOP Asset Management, first convened after the China Securities Regulatory Commission (CSRC) expanded China’s RQFII programme to include asset managers from London and Singapore for the first time. Until then, only the Hong Kong and Taiwan arms of Chinese asset managers were eligible to raise RQFII funds, which allow global investors to allocate renminbi for onshore debt and equity investments. A source within one of the founding asset management firms confirmed to Asiamoney PLUS that the group will host an opening ceremony in September to introduce the association’s leadership team and officially state its goals. The association’s charter is currently being finalised. Competitive advantage While market analysts have argued that CSRC’s decision to expand the RQFII and QFII programmes will not erode Hong Kong’s competitive edge over other offshore renminbi, or CNH, hubs, the Chinese asset managers see it differently. “Regulators’ long-term target is to create a level playing field for everyone in the offshore market which means allowing foreign firms to become more involved in onshore investment and give cities outside of Hong Kong the potential to build their offshore renminbi business,” said a Hong Kong-based source at one of the participating asset managers. “But generally speaking, [Chinese asset managers] in Hong Kong don’t believe that they’re as highly recognised outside Greater China, which limits their distribution channels and caps the investors in their client base,” he added. Fund managers say their ability to raise capital for their RQFII funds is among the most sensitive to these recent changes, as the limited supply of CNH means that investors will opt to allocate money to the most recognisable funds rather than China’s home-grown brands. Already international names including Hang Seng Investment Management and HSBC Global Asset Management have received CSRC approval to raise an RQFII fund. AllianceBernstein, J.P. Morgan Asset Management, PineBridge Investments and UBS Global Asset Management have also applied for licenses. And the competition is likely to continue growing. Chinese regulators have said that expanding the QFII and RQFII programmes is a main component to internationalising the renminbi and, eventually, opening China’s capital account. “There’s no easy way for Chinese funds to compete globally with internationally established asset managers in terms of reaching out to international investors,” said the source within a participating asset management firm. “It’s taken all of these global asset managers decades to build up their recognition. The best that we can do now is utilise our expertise and try to appeal to investors in the long run.” Even the international competitors of Chinese asset management firms are sympathetic to these funds’ long-term plight. “In terms of your feeds, distribution and after-sales services in which you’re dealing directly with investors, it’s difficult to get an edge if you’re a relatively new name regardless of your track record,” said a Hong Kong-based fund manager at a global firm. “As the renminbi continues to internationalise, an investor in the US or Europe will gravitate to large established names like Pimco, Blackrock, Fidelity or Schroders – it’s often easier for compliance to work with a trusted and known brand. It’s just a question of branding and how established a Chinese fund in non-Asia centres.” However, deriving a solution for these companies is more difficult. Petitioning Beijing for more preferential treatment is counterproductive to China’s own interests, and there isn’t a quick solution to becoming more competitive if all global asset managers have the same opportunities offshore. Instead, the association will look to enhance investor education around their brands as well as the offshore renminbi. One HKCAMA member shared a preliminary 16-point checklist of the group’s goals which highlights the need to strengthen communication between Hong Kong-based funds and regulators, implement professional standards to promote CNH growth and products and work with international regulators and investors to promote the Chinese fund management industry. The list also cites the need to “publish books, periodicals, poster, movies, web pages and other promotional materials” to strengthen awareness of CNH opportunities. “Frankly, this can be a very fair playground for Chinese and international asset management funds,” said a source within a Chinese asset management fund in Hong Kong. “Investors can be pretty rational in terms of investing in a fund according to brand and size, but then it’s also the performance that makes the difference. We need to educate global investors of what we bring to the table.”
Posted on: Sat, 24 Aug 2013 10:52:33 +0000
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