Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
The new JV, CSOP Asset Management, will be 70% owned by China Southern and 30% owned by Oriental Patron.
Chang Huifeng, most recently an equity sales trader and risk manager at Citi in New York, will head the venture as CEO.
Guo Yanming, executive director for fixed income and international business at China Southern since 2006, will take up the position of deputy CEO. She was a vice-president for risk management at Bear Stearns in New York prior to joining China Southern.
Michael Wen, currently a fund manager for China SouthernÆs QDII in Shenzhen, has been promoted to CIO at CSOP in Hong Kong. Prior to joining China Southern, Wen was an investment manager at Hang Seng Investment Management between 2004 and 2007. He holds a masters degree in Finance from the University of Hong Kong and has worked for the insurer PICC, Guotai Junan Securities and Guangzhou Dapeng Group.
ôWhat is exciting about this company is it will serve as a gateway for cross-border investments into and out of China,ö says Chang. He says the fund JV will be the first step in turning China Southern into a premium asset management business by introducing the fund house's investment expertise to foreign investors, while bringing new opportunities to domestic investors.
ôWhile global markets are still in a period of high volatility, investors are not aware there are still many untapped opportunities in China-related investments," Chang adds. ôAs the only Chinese fund house operating internationally in the market at this point in time, we feel we can add insight and investment expertise.ö
Chang is keen to position the new business as a premium advisor for foreign institutional investors. He is targeting investors in sovereigns, pensions and endowment funds with CSOPÆs offering and is also adding extra research capability û services he says foreign competitors are still not able to offer comprehensively.
Chang says that, over the course of setting up the JV, he received requests from foreign fund houses for sub-advisory services. But the service would require CSOP to carry a QFII license, which it is in the process of applying for.
In the near-term, the JV is going to take over the QDII portfolio management function from China Southern in Shenzhen. BNY Mellon will remain an advisor to the US part of the portfolio.
According to Wen, his investment platform already has the means to run products from plain vanilla equity and fixed-income assets to absolute return strategies.
In the medium- to long-term, CSOP will source and package foreign products including hybrids, fund of funds, and private equity investments into China SouthernsÆ QDII platform for Chinese investors. Wen notes that more investors are requesting special situation and distressed portfolios this year. ôThese will be supplements to our product line. We are working on more breakthroughs,ö Wen says.
Gao Liangyu, CEO of China Southern, will oversee the business as chairman.
ôWe first started making plans for this JV as we began designing our first QDII fund last year,ö says Gao. ôWe wanted to deepen our understanding of the Hong Kong market.ö However, as Hong Kong was a first step for it to venture beyond the domestic market, China Southern had struggled with the idea of launching a wholly owned business.
Gao says Oriental Patron is an ideal partner because of its deep understanding of the Hong Kong market, its strong grasp on the Chinese economy, and its extensive overseas client network. These are attributes that China Southern needs to step out of China.
Gao is keen to see the Hong Kong JV serve as a springboard for China Southern to become a global brand and that capable international talent will be attracted to the company.
According to Chang, the JV has a registered capital of HK$200 million and an initial headcount of 12. Its current AUM attributable to the QDII portfolio is about $1.2 billion.
It will soon be ready for business once it secures the final licenses from the Hong Kong Securities & Futures Commission. However, CSOP is still short on support staff in IT and compliance, as well as service providers such as a custodian and legal advisor.
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