Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
June 13, 2016 01:00 AM

Chinese money managers seen as both competitors, partners

Joshua Bateman
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    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.

    Increased demand expected

    Managers at the conference said they expect that as China's institutional investor pool expands, demand for investment solutions from domestic and foreign money managers will increase.

    Growing investment demand and regulatory liberalization are also creating partnership opportunities. Over the course of the conference, multiple money managers mentioned product opportunities for foreign money managers bringing investment solutions to China such as alternative, global or multiasset investment capabilities, which many Chinese money managers do not have.

    Jeff Lim, executive director of Beijing-based Harvest Global Investments Ltd., with $101 billion in AUM as of Dec. 31, sees foreign managers as partners, not potential threats.

    “They have investment solutions, which, for now, will help complete my production range,” he said on a panel. “I, as a local player, have access to the market.”

    Although partnerships in China are ideal for some foreign money managers, multiple sources at the conference talked about the growth in China of wholly foreign-owned enterprises, which afford foreign managers greater control and flexibility than partnerships, representative offices and joint ventures.

    According to reports from Shanghai-based consulting firm Z-Ben Advisors, Bridgewater (China) Investment Management Ltd., Aberdeen Asset Management, Fidelity Worldwide Investment Ltd., Schroder Investment Management Consulting (Shanghai) Co. Ltd., BlackRock Inc., and Value Partners Fund Management (Shanghai) Ltd. have all pursued wholly foreign-owned enterprises.

    Just as foreign money managers are positioning themselves to compete in China, development of the country's capital markets also is presenting options to foreign investors.

    Mr. Tang of ICBC Credit Suisse said, “Most international institutions either have no allocation to China or are way underweight.” Over the coming decade or two, however, he envisages a transformational shift: “(As a global investor,) you've got to allocate to the second or first economy and maybe the second-largest capital market on this planet.”

    Although foreign investors have access to China, one reason they are hesitant to act is because global indexes do not include Chinese securities. In addition to MSCI, FTSE Russell is reviewing inclusion of Chinese securities, with implementation possible next year.

    More 'rational' investors

    Although Mr. So thinks absolute dollar flows attributable to inclusion in major indexes will be de minimis initially, it will attract “more rational institutional investors” with “sticky assets.”

    “When you look at the Chinese market, the majority of the assets are in the individual savings, which tend to be more irrational and create more market volatility,” he said.

    Francis Tjia, founding partner and group CEO at Hong Kong-based Income Partners, said that opening China's $7 trillion bond market, will require time, but he believes it is inevitable.

    “At some point you're going to have to get Chinese bond exposure ... I think this is an opportunity and one of our disruptors today,” he said on a panel.

    Investment in Chinese securities by foreign investors is also creating international opportunities for Chinese firms, which have historically focused on their home market.

    Mr. Celeghin spoke about their opportunities outside of China: “If you run a Chinese fund house today, you are like the CEO of a U.S. mutual fund house in 1980. So you are at the very beginning of a massive period of growth.”

    China's money managers are not well known to foreign investors today, but that will change as they expand internationally, either organically or through takeovers. For example, Harvest Global has a FINRA-registered U.S. broker-dealer and, last year, the Financial Conduct Authority authorized the company to operate in the U.K.

    Mr. Lim said, being “in the growth market [China] gives us strong support for expansion globally.”

    Other Chinese firms are carrying out foreign deals.

    In early 2015, Everbright Securities Co. Ltd. became the controlling shareholder in Hong Kong's Sun Hung Kai Financial Ltd.. Later in the year, Haitong Securities Co. Ltd. completed the acquisition of Portugal-based BESI (Banco Espírito Santo de Investimento).

    Casey Quirk consults for a number of local Chinese managers.

    Mr. Celeghin said, “The volume of Chinese (asset managers) trying to buy foreign asset managers, we've never experienced anything like this.”

    Related Articles
    China indexing dreams could finally come true
    Institutions in no rush to enter China's bond market
    A shares set for their time in spotlight
    China approves plan to launch Shenzhen-Hong Kong Stock Connect
    JPMAM wins license for wholly owned asset management firm in China
    Russell Investments, China Asset Management to work together
    Value Partners taps Eastspring's Hong Kong chief as its new CEO
    HNA said in talks to buy stake in Hong Kong's Value Partners
    Harvest Global Investments USA hires CEO, vice president for business developme…
    China lifts ceiling to 51% for foreign ownership of money management joint vent…
    Recommended for You
    smits_hanneke_head-main_i.jpg
    BNY Mellon's Hanneke Smits named to lead 30% Club
    ONLINE_190229936_AR_0_KSSBNLZZEYFR.jpg
    MetLife Investment Management feathers private credit nest with Raven acquisition
    lynch_stephanie_2018_head-main_i.jpg
    Global Endowment Management elevates co-founder to managing partner
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing