Chinese money managers are becoming both competitors and partners for foreign managers, inside China as well as abroad.
Additionally, capital markets development in China is creating investment opportunities for institutional investors from around the globe, sources said at a recent industry gathering.
The trend is supported by U.S.-based institutional investors, including endowments and at least one public pension fund, investing in — or considering — Chinese assets via Chinese managers. And this month, MSCI Inc. is expected to decide whether to include in its indexes shares listed on China's domestic exchanges.
In a presentation at FundForum Asia, in Hong Kong in April, Daniel Celeghin, partner and head of Asia-Pacific with Casey Quirk & Associates LLC, said that aggregate new flows from Chinese institutional and retail investors will increase 16% annually over the next five years, making it the “only large-scale market with double-digit growth for net flows.”
He said foreign money managers need to ask, “What's our near-term China strategy? What will we be doing different in two years, not in five or 10.”
Continuing regulatory liberalization as well as shifts in both institutional and retail investor behavior will result in “trillions of dollars that are going to diversify out of China into the rest of the world,” said Richard Tang, CEO of ICBC Credit Suisse Asset Management Co. Ltd., Hong Kong, during a panel discussion.
Although individuals in China are expected to provide the bulk of the dollars slated for investment, China's institutional investor base is growing. Paul So, head of index funds at Legal & General Investment Management Asia, noted at the conference that China's single-digit retirement savings-to-GDP ratio is a fraction of that in developed markets.
To encourage investment by domestic insurance companies, Chinese regulators in 2015 allowed them to invest beyond Hong Kong and into 45 countries or regions. They also lowered the minimum investible bond grade to BBB- from BBB.