A subsidiary of China Southern Asset Management has been granted the first onshore licence to provide overseas alternative investment products to its wealthy clients, AsianInvestor can confirm.
China Southern Capital received the permit this month, according to a document seen by AsianInvestor. It falls under the qualified domestic investment enterprise (QDIE) scheme, understood to have been soft-launched by the Shenzhen government in the middle of last year.
Beyond international equities and bonds available under the qualified domestic institutional investor (QDII) scheme, QDIE will allow fund managers to divert money into overseas private equity, hedge funds and real assets. It is for high-net-worth individuals and requires a minimum single investment of Rmb1 million ($161,000).
This programme is designed as a version of Shanghai’s qualified domestic limited partnership (QDLP) scheme. But while the latter grants foreign hedge fund managers $50 million each to offer product onshore, QDIE is for subsidiaries of Chinese fund firms and each licence will be granted on a case-by-case basis, depending on the product.
An executive at China Southern Capital revealed the QDIE product it was raising money for was an absolute return, low-volatility instrument. It plans to sell it both directly and through third-party distributors.
“High-net-worth individuals have experience of overseas allocation, there will be demand for such QDIE products,” the executive said.
There has been no official confirmation of the QDIE scheme’s launch, although documents were apparently circulated to financial institutions last year.
The programme is understood to have come from the Shenzhen Municipal Office of Financial Services, in collaboration with the Qianhai Development Authority and Shenzhen branch of the People’s Bank of China.
“The [QDIE] programme was launched in the middle of last year,” said Zhang Howhow, research director at Shanghai-based Z-Ben Advisors.
He noted that the scheme had started slowly, as had QDLP. “There is no particular document or regulation printed in black and white that gives a green light to this programme,” Zhang noted. “Both QDLP and QDIE are local in nature, so they [the regulators] probably want to limit it at the local level given the scheme’s trial nature.”
Zhang indicated the programme was limited to Shenzhen, meaning only the subsidiaries of asset managers registered in Shenzhen or the city’s special economic zone of Qianhai would be eligible to apply.
It is understood qualifying managers need to obtain a licence from the QDIE office before applying for quota to launch a segregated account product. Details on total quota are unclear at this stage.
Local media reported last August that the Qianhai Development Authority was planning a QDLP pilot programme with $1 billion in quotas, with analysts suggesting the scheme would bring competition to Shanghai, as reported.
A spokesperson for Shenzhen Financial Services was unavailable for comment as AsianInvestor went to press.