Bond veteran sets up mutual fund firm in Shanghai

Veteran bond hedge fund manager Yang Aibin has set up only China's second individual-owned mutual fund firm. It will seek institutional clients for its fixed income strategies.
Bond veteran sets up mutual fund firm in Shanghai

A veteran bond manager, who heads a Beijing-based private fund firm, has registered his own mutual fund company in Shanghai, after gaining the go-ahead from China’s securities regulator.

It marks the second time an individual-owned private fund manager has received permission to do so. Yang Aibin's success raises hopes for other private fund managers awaiting approval to move into the mutual fund segment, which allows them to source funds from retail investors.

Pengyang Fund Management registered the company in Shanghai’s free trade zone on July 6, having received approval to set up from the China Securities Regulatory Commission (CSRC) on June 28.

Yang, who holds a 55% stake in Pengyang FM, has 17 years' investment experience. He is the founder and head of private fund house Beijing Pengyang Investment Management, where he employs various hedging strategies across 14 bond funds.

Yang told local media outlet China Fund in January that he would gradually close his private fund business and focus on mutual fund expansion after he received the licence, to avoid conflict of interest between the two entities. 

Penyang's receipt of approval comes after the CSRC gave the green light to Huian Fund Management to set up a mutual fund house in April, marking the first time it had given such an approval to a fund house owned by individuals.

But while Huian’s two major shareholders are He Bin and Qin Jin, former senior executives in the mutual fund industry, Yang is the first private fund manager to have won approval for an individual-owned mutual fund house.

Market observers said the CSRC’s effective mutual fund deregulation would provide private fund managers with an opportunity to gain assets from the massive client base in China’s retail market.

A different beast

However, Pengyang Fund is different from most private fund managers, because of its fixed income focus. It is expected to target institutions, such as insurers, that have a high demand for bond investment and usually give mandates to mutual fund firms rather than private managers in China.

China has only 502 private bond funds managed by 84 firms, representing just 3.3% of the 15,182 registered private funds in the country at the end of 2015, according to data from Gesafe. Yang’s private fund firm manages 14 bond strategies with a total AUM of Rmb38 billion ($5.7 billion) as of May. 

Pengyang, which declined to comment for this article, is required by the CSRC to launch the firm’s first mutual fund within six months of establishing the mutual fund company.

Before establishing Beijing Pengyang, Yang was chief investment officer of fixed income at China Asset Management from 2005-2011 and an investment manager at insurance group Ping An from 1999-2005.

Rules revision

The CSRC had revised the country’s Securities Investment Funds Law, known as the New Fund Law, in June 2013, allowing private fund firms, insurance companies and individuals to launch mutual funds. Previously, only financial institutions such as banks, trust and securities firms were allowed to do so.

There are several private fund managers awaiting approval to set up mutual fund firms, including VStone, Chongyang Investment, Broad Capital and fund distributor Tiantian Fund Sales.

These managers may have some time to wait. It took Pengyang 15 months following its application in April 2015 to get the final go-ahead. 

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