The recent tie-up between Oddo AM and Guosen Securities underscores a trend: Chinese firms looking beyond Hong Kong to internationalise and mid-size European institutions shifting from West to East.
Paris-based Oddo signed an MOU with Guosen two months ago covering asset management and corporate financial advisory, with a focus on mergers and acquisitions and private banking.
They agreed to become strategic partners to work with each other on investment opportunities for qualified domestic institutional investor funds and renminbi-denominated assets, respectively.
Oddo is a 160-year-old family-owned firm with investment banking and asset management as its main business lines. Its asset management arm is in the process of readying its first Luxembourg-domiciled Ucits IV fund invested in renminbi-denominated assets.
“What interests our clients in Europe is diversification from euro and US dollars and participation in the Chinese growth story,” says Nicolas Chaput, Oddo Asset Management’s chief executive. “I believe through this fund we will differentiate ourselves and give something new to our clients.”
AsianInvestor recently reported how Chinese managers are facing a steep learning curve in terms of international marketing and distribution within Ucits as they strive to meet product demand from US and European investors.
Chaput confirms that Oddo will start by focusing on fixed income rather than equities, given the slowdown in China’s economic growth.
“We are not buying into a hard-landing story, but one on cooling down, with GDP growth forecast at the range of 7.5% to 8%,” he adds. “When we see a clear sky that the economy is going to pick up again, we will start to invest in Chinese equities.”
He notes that Guosen can provide investment input on RMB-denominated fixed income securities both onshore and in offshore markets.
At the end of last month Guosen launched its own RMB fixed-income fund in Luxemburg. The fund, under the umbrella of Eurizon Asset Management’s MM Collection, is being distributed through banks in Europe with the goal of raising Rmb2 billion ($316 million).
Guosen believes the fund, with a targeted annual return of 5%, will be attractive to European investors seeking diversification. The company also plans to make the fund available in Latin America and Southeast Asia as a next step.
Meanwhile, Oddo will give its investment input on one of Guosen’s QDII funds which is still awaiting approval from the China Securities and Regulatory Commission.
Guosen Securities is one of seven Chinese securities firms to have obtained a QDII quota from the State Administration of Foreign Exchange ($500 million granted last May).
In fact Daniel Li, chief executive of Guosen Securities Asset Management Hong Kong, says he sees QDII investment as the company’s primary focus.
“There will be a significant amount of money outflow from mainland China, and this trend offers more opportunities than foreign investors accessing the onshore market,” he suggests.