China to Be `Hot Spot' for Global Fund Match, Neuberger Says

Updated on
  • Five global managers may start private funds by year end: NB
  • Neuberger will also consider applying for QDLP license: Liu

Neuberger Berman Group LLC said China will be a “hot spot” for competition among global funds as the importance of the nation’s capital markets grows.

The New York-based firm, which is planning to start a private fund in China, estimates as many as five global managers will set up such operations in China by the end of this year. So far, only Fidelity International has started such a fund to sell onshore products to eligible Chinese investors after the government loosened restrictions in June 2016.

China allowed foreign companies to own 100 percent of private fund management firms for securities investment a year ago, compared with a previous limit of 49 percent. Global funds including Invesco Ltd., Value Partners Group Ltd. and Hanwha Asset Management Co. have also said they are aiming to get regulatory approval to enter the $353 billion market. But China’s opening-up isn’t luring everyone. AXA Investment Managers said it doesn’t plan to form such a fund, and that it will be hard for foreign firms to compete with local players.

“Global asset managers may have different plans at the moment,” said Patrick Liu, head of China and General Manager at Neuberger Berman Investment Management (Shanghai) Ltd. “But strategically speaking, you can’t ignore the growing importance of China as a source of fundraising or as an investment destination. It will be a hot spot for global funds’ competition over the long run.”

Liu was chief executive officer at local mutual fund HFT Investment Management Co. before joining Neuberger Berman this year. Prior to HFT, he was head of greater China at Deutsche Asset Management from 2013 to 2015.

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China’s private funds engaged in securities investment managed a total of 2.4 trillion yuan ($352 billion) in assets as of the end of April, according to the Asset Management Association of China. Private fund companies can sell products to up to 200 qualified investors, either institutions with net assets of no less than 10 million yuan, or wealthy individuals.

“For all these years, it was purely a local game,” said Liu.

While lifting the stake limit for private funds, the Chinese government still keeps the 49 percent cap for mutual funds, which oversaw 9.3 trillion yuan of assets as of March 31.

“We have a bright outlook on the fund market growth in China,” said Choi Young Jin, executive director and chief executive officer at Hanwha Asset Management Co.’s subsidiary in China. The firm has set up a back office and compliance team in Tianjin and is in the process of registration at the AMAC to be a private fund manager, according to Choi.

Neuberger’s Liu said the firm will also consider applying for the license for the qualified domestic limited partnership program, which allows foreign funds to raise money onshore to invest overseas.

— With assistance by Judy Chen

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