Principal Financial Group Inc. (PFG), the provider of life insurance and retirement products, said it will use a $150 million China investment quota approved yesterday to start a fund for non-U.S. institutional clients.
Principal is seeking investors for the fund, which will be domiciled in Dublin, Adam Lackey, a company spokesman, said yesterday by phone. Tony Chu, a Hong Kong-based portfolio manager, will help oversee the investments.
Principal, based in Des Moines, Iowa, is seeking to expand in emerging markets including China, where the economy may grow 8 percent this year, compared with about 2 percent in the U.S., according to economists’ estimates compiled by Bloomberg. China’s State Administration of Foreign Exchange granted the firm’s asset-management unit approval to buy as much as $150 million of yuan-denominated equities known as A-shares, Principal said in a statement.
“We’ve already had interest from non-U.S. institutional investors,” Lackey said. “Now that we have the quota, the fund is ready to go.”
Principal Global Investors manages $259.8 billion for clients including retirement plans and has offices in Singapore and Hong Kong, according to yesterday’s statement. The firm manages assets for Chinese clients as part of a joint venture with China Construction Bank Corp., the nation’s second-largest lender by assets.
China increased the total amount qualified foreign institutional investors can put into stocks, bonds and bank accounts to $80 billion from $30 billion, the China Securities Regulatory Commission said in April. The commission had approved 170 foreign intuitional investors at the end of May, according to its website.
China is working to attract foreign capital to the world’s second-largest economy as growth slows. The benchmark Shanghai Composite Index declined 5.7 percent this year before today.
“China wants to open up their capital markets,” said Michael Ding, lead portfolio manager of the China Regional Fund at U.S. Global Investors, which oversees about $2 billion. “You can improve the liquidity in the market.”
Investors can purchase shares of Chinese companies listed in Hong Kong without government approval, Ding said. The Hang Seng China Enterprises Index (HSCEI) of 40 Chinese companies listed in Hong Kong had slumped 4.2 percent this year through yesterday.
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