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Harvest Fund Management in Beijing says it just raised Rmb40 billion ($5.1 billion) in a single day for its Harvest Strategy and Growth Fund, a market record. Once the launch was announced, the companyÆs website was accessed over 100,000 times and its call centre handled a daily average of more than 10,000 telephone calls. The new fund resulted in approximately one million new accounts.
The company believes it will be the first Chinese fund house to achieve Rmb100 billion ($12.8 billion). As of the end of the third quarter, it had an AUM of over Rmb30 billion, plus it manages an estimated Rmb15-16 billion sourced from the National Council for Social Security Fund on a segregated account basis.
Deutsche Asset Management holds a 49% stake in Harvest.
The Harvest launch was the biggest of a recent slew of blockbuster fund ôIPOös, as new launches are known in China, given they are listed on an exchange. December has already witnessed ICBC Credit Suisse Fund Management raise Rmb12.2 billion with its stable growth fund, and ABN Amro TedaÆs Prior Enterprise Fund raise Rmb8.5 billion.
These follow several big launches in November, including ChinaAMCÆs Rmb14.1 billion growth fund and China SouthernÆs Rmb12.5 billion growth fund.
Beneath the headline numbers, fund companies are paying out dividends like crazy, reports Peter Alexander, principal at Shanghai-based consultancy Z-Ben Advisors.
He explains that many companies are making large payouts from modestly sized equity funds that have performed well, and have thus seen their net asset values (NAVs) rise. Investors in China are reluctant to purchase units in a fund with a high NAV, but by selling back a third of the units û a typical dividend action û the firms can not only generate cash, but lower the fundsÆ NAVs close to par (1).
Some firms are issuing dividends on existing products and then using that as a marketing aid to launch new products. Harvest, for example, issued a large dividend at Rmb0.49/share right before its latest IPO. ChinaAMC also had another product issue a big dividend before launching its successful growth-fund launch.
But others are taking those same funds and blitzing the market with these funds to raise money in secondary offerings, showcasing the productÆs newly reduced NAV as well as its track record. And given the huge run-up in the A-share market this year, just about every fund in existence has an index-beating history.
Guangzhou-based E Fund Management, for example, has just raised Rmb10 billion through a secondary share offering of a fund after it returned 44% of a fundÆs NAV, at Rmb0.81/share, and slashed the fundÆs NAV from 1.8 to 1.0. Invesco Great Wall, BOC International, China Southern and Yinhua Fund Management have also practiced this, says Z-BenÆs Alexander.
He notes that no firm has attempted this strategy with a big fund (say Rmb1.5 billion or more) in case regulators in Beijing might fear it could impact the markets.
Shanghai-based Huaan Fund Management is reportedly paying out dividends of Rmb0.93/share for its Baoli Allocation Fund, pushing this tactic to a new extreme. Alexander predicts Huaan will soon market this fund as a low-NAV product with a strong track record, in the hopes that ChinaÆs retail investors remain euphoric for domestic equities.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
Insto roundup: GPIF staff say J-Reits more attractive than traditional assets; Hong Kong's strict Spac criteria
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.