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The move expands Deutsche BankÆs presence in China, following its recent approval to incorporate as a local bank in the mainland. The bank already operates in Beijing, Shanghai and Guangzhou providing cash management, global market trading, foreign exchange and commercial banking services. The bank's spokesman in Hong Kong has declined to disclose the amount paid for the additional shares.
As of 31 December, Harvest had RMB252 billion ($35 billion) in assets under management. According to Shanghai-based research company Z-Ben Advisors, Harvest is the third-largest asset management house in China. Harvest is also among the first few China Securities Regulatory Commission-approved fund house to have issued a Qualified Domestic Institutional Investor (QDII) fund and is approved to manage corporate annuities. It currently employs 309 staff in China.
Of the earliest four QDII funds, HarvestÆs fund has been under the heaviest pressure from mainland media. In ChinaÆs æOne-kuaiÆ obsession, in which investors actively monitor and trade around a fundÆs NAV (from Rmb1, or one kuai) up, at RMB0.71, HarvestÆs QDII fund is trading at the lowest level compared with its competitor China AMC (RMB0.825), China Southern (RMB0.852) and JPMorganÆs venture China International (RMB0.761).
Harvest has had a hard time retaining fund managers, and some observers say this could explain the fundÆs performance. Amid the current private equity frenzy in China, three key fund managers have left the company including Wang Gui-min, Lao yin and Zhao Jun. Its chief investment officer Dao Yu-min has been widely rumored to be the next to go. Dao did not return phone calls by press time.
Harvest is one of the so-called ôOld Tenersö to have sold out a stake to a foreign partner. ôOld tenersö refers to the 10 fund houses that are credited to have laid the foundation of the asset management industry back in 1998, which include China Asset Management, China Southern Asset Management, Hua An Fund, Bosera, Penghua, Changsheng, Dacheng and Guotai Asset Management.
China AMC, China Southern and Harvest are among the first fund houses to have received approval to launch overseas funds, between September and October last year.
A Beijing-based fund executive notes that ChinaÆs fund industry has seen a four-fold increase in assets in one single year in 2007. Shareholders to these fund houses can simply sit on their equities and wait for their money to multiply, he says. Deutsche's larger stake in Harvest could allow it to participate further in these gains.
Prior to Deutsche BankÆs entry, UKÆs Prudential was among HarvestÆs initial suitors. In 2001, it signed on to advise HarvestÆs investment management, execution infrastructure, and technical capabilities. However, that relationship later ended after HarvestÆs chairman led a team that visited Fidelity, State Street, Wellington and Deutsche Asset Management in 2003.
In March 2005, Deutsche made a deal with Harvest, which agreed to sell a 19.5%.
Stirling Finance chairman Stuart Leckie, who sat on HarvestÆs advisory committee in 2004, says Harvest always wanted a strong partner, but they didnÆt want to sell out too much too quickly.
At that time, Deutsche Bank had wanted a presence in China but the country was in the midst of a prolonged bear market. Deutsche's investment banking arm was one of the earliest quota recipients for the qualified foreign institutional investor (QFII) scheme, which allows it to invest in the then-cheap A-share market. Deutsche had doled 90% of its quota out to clients, says a source from the bank û a move its own asset-management teams later regretted. So the enhanced shareholding in Harvest may go some way to giving the firm more of the A-share exposure it craves.
Deutsche Bank Asia-Pacific CEO Colin Grassie says the increased stake in Harvest is a testament to the bankÆs commitment to growing its business in one of the worldÆs most dynamic markets.
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