How is the joint venture with China Merchants Securities going?

Ryan: It's going well. We're preparing to launch our first fund. We have now about 50 staff over there, including three ING secondees. The deputy general manager for the company is a guy who worked here in Hong Kong for ING for the last couple of years. The chief investment officer came from our Taiwan business. He has twenty plus years experience. And another very experienced equity manager from Singapore. We see opportunities to set up a very high quality investment management business there, even within the constraints of the local market.

What constraints?

The constraints are that A share companies and the independent researchers and brokers, are not used to communicating with foreign fund managers. So when we look at the information and research they produce, while a lot of it is very good, it's not exactly what we want to see. So we're focusing a lot on original research, we have people visiting companies daily. We're pretty close to selecting our final target portfolio for the launch of our product, hopefully in the next month or so.

What's the target size for the fund?

Two to three billion renminbi, particularly in the current market, would be a good result.

What plans do you have for future products?

There are more funds in the pipeline. We have a ten-year business plan for this business, although it obviously doesn't include products ten years out, but we certainly have planned our products release for the next couple of years. That will depend a little bit on some of the changes to the capital market in China. At the moment there is a limited number of securities to invest in. But we do think that is going to change.

In what way?

We are looking for an expansion of the bond market in China. That comes from two directions. We know from our insurance company experience that there's a lot of money building up in life insurance companies but not a lot of long-dated paper in China to invest in. So from an asset-liability matching point of view, the industry needs longer dated securities. There are re-financing opportunities within the financial system that could produce some longer dated securities. Maybe the government will decide to issue longer dated securities as well.

These initiatives are needed to support the growing insurance industry, particularly as foreign competition starts to have an impact. The average investor in China is also looking for better returns than they get on bank deposits. The stock market hasn't been doing well, so they'd like to invest in bonds but here aren't many around. So there is certainly pent up demand and we're hoping the supply situation will be resolved in the next couple of years. I don't see it changing much in the next six months.

Will ING be involved in these changes?

There are certainly opportunities for companies like ours to get involved in some of the generation of these opportunities. Helping to identify the type of assets we feel would be appropriate to securitise, and then invested in by funds.

What is your relationship like with the CSRC?

It's not that much different with the SFC here. The SFC is very consultative with the industry and CSRC is the same, not just with domestic fund managers but with foreigners as well. The domestic fund managers have done a very good job, from a very low base of knowledge four or five years ago they have built up a viable industry with not too many problems, and a pretty good track record relative to the index that they manage against. So there's a level of expertise within domestic companies. We don't underestimate them as competitors.

The CSRC has been responsive to our requests for information about things and I'm sure they talk to many foreign fund management companies that walk through the door. We found them very approachable.