The chief executive of BEA Union Investment Management, Eleanor Wan, has spoken of wanting to test online distribution in China after teaming up with Tianhong for its first fund under mutual recognition.
The firm submitted its Asian bond and currency fund to the China Securities Regulatory Commission (CSRC) for approval last month under the cross-border mutual recognition scheme, which was launched on July 1 to allow funds to be registered and sold in both Hong Kong and the mainland.
The CSRC responded that it had received BEA Union’s application towards the end of August, one of 13 northbound submissions from eight fund houses to have been acknowledged. It is expected these products will be approved before the end of this year.
The northbound first-movers in mutual recognition alongside BEA Union are Schroder Investment Management, BOC Hong Kong, JP Morgan Asset Management, Amundi, Zeal Asset Management, Hang Seng Bank and BOCI-Prudential, as reported.
Wan told AsianInvestor that BEA Union had decided to experiment with digital distribution for its first fund under the cross-border scheme due to the sheer size of the mainland market and the initial fundraising success of the channel. It is the firm’s first foray into online distribution and as such it is looking to test the water.
Tianhong Asset Management launched China’s first internet product – a money-market fund called Yu’E Bao – in June last year in partnership with Alibaba’s online payment platform Alipay (subsequently rebranded Ant Financial). It raised more than $100 billion and catapulted little-known Tianhong from China’s 52nd largest manager by assets to its largest within six months.
BEA Union opted to partner Tianhong due to its existing relationship with Ant Financial and its hands-on experience with registration and distribution.
Another factor in BEA Union’s decision was the fact it chose to launch a bond and currency product, which given the target mass retail market onshore might be a difficult sell via a traditional banking channel.
Wan noted that most onshore Chinese individuals were more comfortable investing in equities, and so the story around its bond product would be one of diversification.
Launched in August 2008, the bond fund invests across government and corporate credit in Asia in various currency classes. It has returned 8.45% annualised over the past five years to August 31, against 4.86% for the HSBC Asian USD Bond benchmark, by Morningstar data, and won an AsianInvestor award for Asian fixed income in 2014. As at the end-July it had $108 million in AUM.
Wan also pointed out that BEA Union planned to apply to launch a second product in China under the mutual recognition scheme – an Asian mixed asset fund offering exposure to equity and fixed income. She expected to submit the fund for approval at the end of this year, although declined to disclose fund details at this stage.
At present the firm’s mainland business is being served out of Hong Kong, although Wan did not rule out the possibility of hiring dedicated services professionals onshore for its mutual recognition business.
Asked whether the firm might open a China office, Wan replied: “It’s too early to decide now as our MRF [mutual recognition of funds] business hasn’t started. But this is an interesting time in the funds business. You need to look long term.”
BEA Union has a qualified domestic institutional investor (QDII) business in China, where it partners banks such as Bank of East Asia for fund distribution.
But it is not the first fund house to partner Tianhong under the mutual recognition initiative. Already boutique firm Zeal Asset Management, which was founded by former executives of Value Partners, has signed up with Tianhong for a product set to be launched.