According to sources, David Chang has left his role as head of fixed income China at BNP Paribas to become a deputy CEO at Guotai Asset Management. Chang departed from BNPP last week and will assume his new post at the end of July. The move will be a literal vertical ascent for Chang, who will move from his current office on the 25th floor of the Shanghai World Financial Centre to the 38th floor.
Meanwhile, an unnamed Frenchman will assume the head role for Guotai's international investments. (Guotai will develop its first QDII with Nasdaq OMX. A second fixed income QDII is said to be in the planning, in which Calyon will play a key role.)
Sources say Guotai will significantly bolster its fixed income capability with Chang's appointment. A source described Chang as "quite a gun". His arrival spells to Guotai's ambition to become a serious fixed income house not just in the onshore renminbi market, but potentially in the offshore G3 arena as well, as China's QDII initiatives broaden with further variety in product choices.
With Chang on board, Guotai will become one of the few houses in the fund industry to be seriously engaging foreign banks in bringing in new technology and trading platforms to drive innovation in the current stagnant world of Chinese fixed income. (Most fund houses treat fixed income as a side dish they serve next to A-shares. The rise and fall of A-share indices currently drive the bulk of their bottom lines.)
Industry observers also applaud Chang's move as yet another initiative Guotai has taken to transform itself with a stronger mix of staff with international profiles, a project its management has taken close to heart over the past two years. Chang will be the first overseas-educated Chinese, with no links to the old establishment, to make management rank in an 'old 10' company. (Guotai is one of the original 10 companies that founded the Chinese fund management industry in 1998.)
Chang started his career at JP Morgan Investment Management in 1994, where he worked his way up from being a quant analyst helping pioneering various interest rate analytics models for JP Morgan, to becoming its head of derivatives strategy for fixed income. At JPM, he was responsible for generating, structuring and implementing interest rate, mortgage and credit derivative strategies for some $100 billion worth of fixed income assets, on which he is said to have generated $100 million a year in profit for the firm.
By 2002 he moved onto a senior proprietary trader role at Credit Industriel et Commercial in New York. At Credit Industriel, he had co-managed the macro direction and global strategies for the group's $4 billion proprietary interest rates and mortgage trading books for two years. By 2004 he was made a managing director at Cornerstone Capital Partners, where he managed relative value arbitrage strategies for the firm's fixed income fund.
Chang took up the China head of fixed income role with BNP Paribas in August 2007. He has a double degree in mathematics and computer sciences from Cornell University, from where he had also graduated Magna Cum Laude in Master programme for computer sciences.
His move has come in the midst of an approval process where foreign banks of the likes of his former employer BNP Paribas will be allowed to develop onshore debt capital markets business in renminbi. At present, foreign banks' fixed income desks are allowed to do little more than trade bonds in the secondary market.
However, subject to the sign-off of the new guidelines under the National Association of Financial Market Institutional Investors (NAFMII), the banks may be begin to develop a more sizeable onshore presence with the ability to write new debt issues.
By clinching the new deal, foreign banks may do business with domestic insurers and asset managers in onshore fixed income for the first time. Chinese insurers are required to cap equity investments to a maximum of 20% by law, leaving the bulk of their balance sheets in fixed income instruments where they face poor access to new deals.
Asset managers, on the other hand, have received less than preferential treatment in areas such as trading and research from local banks because of their small order size. It's not unusual to see a bank's single trading ticket dwarf a fund house's entire fixed income portfolio.
Bankers in Shanghai say the approval will likely take place at the end of July. As there are now few takers for structured products among the domestic banks or asset management houses willing to develop new QDII programmes; banks' focus has shifted to fixed income and sales from 'flow products' such as FX, rates and credit.
However, there are still a few pessimists residing at the foreign banks who question whether regulators and semi-official agencies such as NAFMII will truly open the doors to them to pursue scale and compete with the local banks.
Guotai Asset Management is 70% owned by China Jianyin Investment, which is 100% owned by Central Huijin, a subsidiary of China Investment Corporation; 20% owned by Wanlian Securities; and 10% owned by China Power Finance. The company has recently struck a deal with Italian insurance firm Assicurazioni Generali, which will acquire 30% of Guotai for a €100 million.