China Retail: The Long Term Jumbo Customer
"...You may be disappointed if you fail, but you are doomed if you don't try."
Beverly Sills, 1929- 2007
American opera singer and manager
The recent well-publicized success of an international mutual fund that attracted US$8 billion in the first day it was available should raise quite a few eyebrows. This was the first time that an international stock product was offered into the mainland Chinese market. This was made possible by recent changes in the Qualified Institutional Investor Program or QIIP which allows Chinese domestic fund managers to work with sub-advisors overseas.
The firm in question that benefited was BNY Mellon. Other overseas international stock fund providers are likely to be T. Rowe Price, JP Morgan Chase & Co., Fortis, Deutsche and Soc Gen.
International stocks fill a gap in the Chinese market that local fund companies are not able to fill. Hence, their reliance on foreign sub-advisers. They also offer higher returns when compared to short term fixed income products such as savings accounts which yield over 6% in local currency terms. There is also the argument for the average Chinese citizen to "feel diversified" from their own high octane stock market and to own a piece of Disney or other brand name foreign companies.
Of course, the opening up of the mutual fund market in China is certain to garner the attention of HFoF and single hedge managers. The argument for higher yield and diversified returns remain compelling arguments in the alternative investment setting.
Of course, there are considerable legal and strcutural hurdles that need to be ironed out before the mass of Chinese investors will be able to tap into the hedge fund industry. But when this happens, there will be even more of a premium on good quality, scalable capacity. And at least initially, the advantage may go to these same global fund managers that have already lined up local distribution and that have access to product - whether directly or through some form of "wrapper" or structured note. Expect local executive hirings to increase as the opportunity really is phenomenal for this long term jumbo customer. Mahalo.
"...You may be disappointed if you fail, but you are doomed if you don't try."
Beverly Sills, 1929- 2007
American opera singer and manager
The recent well-publicized success of an international mutual fund that attracted US$8 billion in the first day it was available should raise quite a few eyebrows. This was the first time that an international stock product was offered into the mainland Chinese market. This was made possible by recent changes in the Qualified Institutional Investor Program or QIIP which allows Chinese domestic fund managers to work with sub-advisors overseas.
The firm in question that benefited was BNY Mellon. Other overseas international stock fund providers are likely to be T. Rowe Price, JP Morgan Chase & Co., Fortis, Deutsche and Soc Gen.
International stocks fill a gap in the Chinese market that local fund companies are not able to fill. Hence, their reliance on foreign sub-advisers. They also offer higher returns when compared to short term fixed income products such as savings accounts which yield over 6% in local currency terms. There is also the argument for the average Chinese citizen to "feel diversified" from their own high octane stock market and to own a piece of Disney or other brand name foreign companies.
Of course, the opening up of the mutual fund market in China is certain to garner the attention of HFoF and single hedge managers. The argument for higher yield and diversified returns remain compelling arguments in the alternative investment setting.
Of course, there are considerable legal and strcutural hurdles that need to be ironed out before the mass of Chinese investors will be able to tap into the hedge fund industry. But when this happens, there will be even more of a premium on good quality, scalable capacity. And at least initially, the advantage may go to these same global fund managers that have already lined up local distribution and that have access to product - whether directly or through some form of "wrapper" or structured note. Expect local executive hirings to increase as the opportunity really is phenomenal for this long term jumbo customer. Mahalo.
posted by Franklin Scruggins | 10:21 AM
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