Korea-based asset management firms Mirae Asset and Samsung Investment Trust Management (Samsung ITMC) are raising money for newly granted quotas from Chinese regulators for A-share portfolios.
Both were granted $150 million quotas to invest in renminbi-denominated shares and bonds by the China Securities Regulatory Commission under China's qualified foreign institutional investor (QFII) programme.
Foreign firms granted QFII quotas are always under pressure to fill these, lest any unused quota be revoked, or future requests for additional investment flows struggle to be approved. Prudential Financial's Korean fund management company has also been given a QFII quota.
The current market environment has made it difficult for Korean asset managers (or, for that matter, any asset manager) to raise new funds for an equity product.
Mirae has used its existing H-share and global emerging market funds to buy up most of its QFII quota. Although rivals in Seoul say internal funding accounts for nearly all of this, Mirae officials say the firm has in fact raised about 25% of its $150 million from third-party investors.
Samsung ITMC has so far raised about $60 million, of which $50 million is from its parent, Samsung Life Insurance. It will continue to market its China A-share product to Korean institutional investors over the next several weeks.
This shows how little demand there is in Korea for risk assets, particularly in Chinese or emerging market equities, an area where investors have had their fingers burned. But it also demonstrates that those firms with enough wherewithal to fill a QFII quota can position themselves for a day when demand returns.
Mirae was the first Korean player to apply for a QFII license, as far back as December 2006, when it requested $400 million. In July 2008 it finally got the go-ahead from the CSRC, along with other foreign investors such as Samsung.