Capital Securities Investment Trust (Site) is in line to become only the second Taiwanese asset manager to start a fund management operation in mainland China.
The firm received regulatory approval last week from Taiwan’s Financial Supervisory Commission (FSC), the island’s securities, banking and insurance regulator.
It has agreed to establish a joint venture in Shanghai with China’s Huaxi Securities in which it has a 49% stake and its partner 51%. The venture, Huaxi Capital Fund Management Company, will begin with registered capital of Rmb200 million.
However, the new JV has yet to receive approval from the China Securities Regulatory Commission (CSRC), which it needs before it can start operating.
If it does get the go-ahead it will become the second Taiwanese asset manager to set up in China after Fubon Fund Management, which was established in Beijing this July.
Overall there are a total of 68 fund management companies in China competing for market share in what is a shrinking mutual funds industry. In the third quarter this year, for example, the industry saw its total AUM sink 9.8% to Rmb2.1 trillion.
Despite the evident headwinds, Vincent Lai, chief executive officer of Capital Site, describes the budding China venture as a long-term commitment, adding that the JV partner shares the same vision.
Lai says the two parties will combine their research and investment capabilities, with Huaxi Securities focusing on distribution and Capital Site on overseas investment, risk control and marketing.
“We have around six to seven years’ experience of investing in the Asia-Pacific region and emerging markets,” he notes, adding that the firm uses its experience to develop qualified domestic institutional investor (QDII) products.
However, data provider Wind Info noted in September this year that China's 44 QDII funds had accumulated a loss of Rmb45 billion, with just six having recorded positive accumulative returns, including two gold funds launched this year (Lion and E Fund).
“Although Chinese retail investors are not very passionate about QDII funds right now, it will become an [investment] trend in the future,” Lai counters.
With preparations still being made, the new venture hasn’t confirmed any key hires yet. Lai says senior management will either be appointed by both stakeholders or through external recruitment.
Under the Economic Cooperation Framework Agreement (ECFA) signed between China and Taiwan last June, a number of joint ventures in mainland China are in the planning stages.
Cathay Site has confirmed a cooperation with China Development Bank Securities to form a JV FMC in Beijing. Meanwhile, SinoPac Site and Huarong Securities also plan to roll out a mutual funds business with registered capital of Rmb200 million, and Yuanta and Polaris are due to merge and set up a JV with China Resources Trust.