China Life Franklin JV to focus on HK equity
Eventually China Life Franklin Asset Management may manage third-party assets in many asset classes, but the investment teamÆs mission is now to build a track record.
China Life InsuranceÆs new asset-management joint venture with Franklin Templeton in Hong Kong will initially focus on building a track record in Hong Kong equity, but will ultimately broaden to other asset classes, says Yang Guang, senior portfolio manager at Templeton who has been seconded to advise the JV.
In anticipation of the China Insurance Regulatory Commission finalising QDII rules for insurance companies, China Life has established the JV, called China Life Franklin Asset Management, to develop its own capabilities in managing international assets. China Life owns 74% and Franklin Templeton 26%. Zhao Wei, former head of asset allocation at China Life in Bejing, has been named CEO of the JV, while Templeton will take care of its operations and other back-office requirements. Jia Dong is deputy CEO.
China Life is the largest insurer on the mainland, accounting for roughly 50% of the life insurance market and with over RMB750 billion ($98.5 billion) of assets under management. Given the insurance industryÆs penetration of mainland households is a mere 3%, assets at these entities are expected to continue growing at a fast clip.
Chinese authorities have already published regulations regarding commercial banks as qualified domestic institutional investors. Similar regulations for insurance companies are expected soon, perhaps in the next four weeks, which will allow insurers to invest domestic assets abroad. These rules are expected to follow lines similar to those for commercial banks, broadening the scope of QDII beyond global fixed income to include equities, funds and structured products of any stripe bar hedge funds authorised in Hong Kong.
China Life already has offshore assets, due to its overseas insurance activities as well as an initial public offering in Hong Kong. Yang, who has worked for Franklin Templeton in the United States for 12 years managing Asian and global equity portfolios, is assembling a team at the JV to handle some of these assets.
ôFor insurance companies, good asset management is key. We can help them build opportunities in Chinaö, he says. As a joint venture partner, Franklin Templeton seems like a natural choice, having taken a significant stake in China LifeÆs $3 billion Hong Kong IPO.
Yang says China LifeÆs options regarding offshore investments will remain limited. ôIt has few choices,ö he explains, noting that hiring external fund managers is a challenge for investors that have no experience of international capital markets. China Life, however, is expected to use some other managers or invest directly, as well as invest via the JV.
Yang says the first step is to get the team in place and build a track record managing Hong Kong equities, including H shares and red chips. He would not disclose the initial size of the portfolio, he says it will be ôquite substantialö. For now the JV is dedicated to managing assets for China Life, but may over time seek to run investments on a third-party basis for other mainland institutional investors. In the long run the goal is to evolve into a fully fledged global asset manager.
ôI wonÆt speculate on the timeframe of this transition,ö Yang adds. ôIt will ultimately depend on performance and market conditions.ö The immediate focus: build a good track record. The JV currently has a headcount of 15, most of whom are investment professionals, as the back office has been outsourced to Templeton, but Yang says he will add a few more in areas such as fixed income this year.
In anticipation of the China Insurance Regulatory Commission finalising QDII rules for insurance companies, China Life has established the JV, called China Life Franklin Asset Management, to develop its own capabilities in managing international assets. China Life owns 74% and Franklin Templeton 26%. Zhao Wei, former head of asset allocation at China Life in Bejing, has been named CEO of the JV, while Templeton will take care of its operations and other back-office requirements. Jia Dong is deputy CEO.
China Life is the largest insurer on the mainland, accounting for roughly 50% of the life insurance market and with over RMB750 billion ($98.5 billion) of assets under management. Given the insurance industryÆs penetration of mainland households is a mere 3%, assets at these entities are expected to continue growing at a fast clip.
Chinese authorities have already published regulations regarding commercial banks as qualified domestic institutional investors. Similar regulations for insurance companies are expected soon, perhaps in the next four weeks, which will allow insurers to invest domestic assets abroad. These rules are expected to follow lines similar to those for commercial banks, broadening the scope of QDII beyond global fixed income to include equities, funds and structured products of any stripe bar hedge funds authorised in Hong Kong.
China Life already has offshore assets, due to its overseas insurance activities as well as an initial public offering in Hong Kong. Yang, who has worked for Franklin Templeton in the United States for 12 years managing Asian and global equity portfolios, is assembling a team at the JV to handle some of these assets.
ôFor insurance companies, good asset management is key. We can help them build opportunities in Chinaö, he says. As a joint venture partner, Franklin Templeton seems like a natural choice, having taken a significant stake in China LifeÆs $3 billion Hong Kong IPO.
Yang says China LifeÆs options regarding offshore investments will remain limited. ôIt has few choices,ö he explains, noting that hiring external fund managers is a challenge for investors that have no experience of international capital markets. China Life, however, is expected to use some other managers or invest directly, as well as invest via the JV.
Yang says the first step is to get the team in place and build a track record managing Hong Kong equities, including H shares and red chips. He would not disclose the initial size of the portfolio, he says it will be ôquite substantialö. For now the JV is dedicated to managing assets for China Life, but may over time seek to run investments on a third-party basis for other mainland institutional investors. In the long run the goal is to evolve into a fully fledged global asset manager.
ôI wonÆt speculate on the timeframe of this transition,ö Yang adds. ôIt will ultimately depend on performance and market conditions.ö The immediate focus: build a good track record. The JV currently has a headcount of 15, most of whom are investment professionals, as the back office has been outsourced to Templeton, but Yang says he will add a few more in areas such as fixed income this year.
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