Major China-based fund managers are setting up shop in Hong Kong for the first time, in a bid to satisfy Chinese investors’ appetite for US dollar-based products.
The foray by China-based funds into Hong Kong began last year as China scrapped its Covid-19 lockdowns, finally allowing high net worth Chinese families to travel and diversify their investments in their hunt for stronger returns.
At least eight mainland-based funds, including billion-dollar yuan quant funds, equity funds and mutual funds, have set up operations in Hong Kong in the past six months, and more than 10 others are headed there, according to a Reuters tally based on sources and public information.
Most of them are rapidly building offshore sales and research teams and preparing for the launch of their first US dollar funds. As mainland-based funds are yuan denominated, fund managers need to set up in Hong Kong to be able to offer foreign currency products.
One of those firms, Beijing-based Ren Bridge Asset Management, which manages 17 billion yuan ($2.5 billion), opened an office in Hong Kong in March and is in the process of applying for an asset management licence there.
Shanghai Qianxiang Asset Management, a quant hedge fund in China managing over 10 billion yuan, received an asset management licence from Hong Kong’s Securities and Futures Commission in February and is developing its first global commodity trading adviser strategy for investing in overseas markets.
Wealth management firms such as Noah Holdings, China’s largest independent wealth manager, are also aggressively expanding teams in Hong Kong.
Hedge Funds Growth
China’s onshore hedge funds have seen exponential growth in the past decade, with 6 trillion yuan of assets under management, according to UBS research.
Qianxiang’s bigger competitor Lingjun Investment, which manages more than 60 billion yuan, formed a Hong Kong marketing team and launched its first offshore quant fund late last year, according to regulatory filings and sources.
Star asset manager Foresight Fund Management, a Shanghai-based mutual fund founded by veteran investor Chen Guangming, announced the opening of its Hong Kong branch in March.
Erin Wu, head of investor relations at OP Investment Management, a Hong Kong-based hedge fund platform that provides services to new funds, said she has received more inquiries this year than before the pandemic.
- Reuters with additional editing by Sean O’Meara