China social security fund in fresh mandates drive

The National Council for Social Security Fund is inviting domestic investment funds and securities firms to apply to manage its growing assets for the first time in six years.

China’s National Council for Social Security Fund (NCSSF) has placed a notice on its website inviting domestic investment funds and securities firms to apply to manage its growing assets.

If successful, it will be the first time since 2004 that the fund has added domestic managers to its 10-strong list.

Regarded as China’s most sophisticated asset owner, the NCSSF’s new recruitment plans are likely to trigger a fierce round of competition in the industry.

Fund management firms will be eager to be selected, given the relatively low maintenance costs, prospect of stable long-term cooperation and the opportunity to enhance their brand awareness.

The NCSSF’s assets under management have grown 38 times since inception in 2000, from Rmb20 billion to Rmb776.6 billion by the end of 2009.

Fund chairman Dai Xianglong has been reported as saying he wants to grow AUM to Rmb1 trillion by the end of this year and Rmb2 trillion by the end of the 12th five-year plan.

The first round of recruitment for domestic investment managers was in 2002, when six fund managers – Southern, Bosera, China AMC, Penghua, Changsheng and Harvest – were selected.

In the subsequent two years, Guotai, E Fund, China Merchant and CICC also joined the NCSSF’s asset management team. The list has not been changed since.

But the process of manager selection can be prolonged – it took almost two years for the NCSSF to choose overseas fund managers. That list, finalised this March, includes Allianz, Invesco, UBS/CICC, Alliance Bernstein, AXA Rosenberg, State Street Global Advisors, Janus Intech, T. Rowe Price, BlackRock and Pimco.

To qualify, Chinese fund management firms are required to have assets under management of more than Rmb20 billion ($2.99 billion), paid-in capital no less than Rmb100 million and net assets above Rmb100 million.

Domestic securities companies, meanwhile, need to be category A classified (based on various factors including capital adequacy), with net assets of no less than Rmb2.5 billion and entrusted assets of at least Rmb10 billion. In addition, those institutions should demonstrate at least three years’ experience in equity investment.

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