Value Partners Group, one of Asia’s largest independent asset management firms, is extending its footprint both in mainland China and beyond Asia Pacific (APAC) to meet increasing investor demand for investment management services and portfolio diversification.
The Hong Kong-headquartered asset manager is looking to widen its slate of product offerings into China. And the firm is also advancing its expansion into markets outside APAC to tap a growing appetite among mainland Chinese investors to integrate non-domestic assets into their portfolios.
“We’re only at the start of a golden era for wealth and investment management in China,” says Timothy Tse, Chief Executive Officer at Value Partners. “The demand among Chinese investors for investment products both within and outside of China is just insatiable.”
Fund flows sourced from China, which Value Partners considers a home market, account for a consider portion of its overall business. The majority of its portfolio is focused on the Greater China region, and the company also has a strong product mix. It has also established close and vast distribution partnerships with various Chinese banks and financial services companies.
“We’re home-biased because the Chinese markets just present tremendous promise and opportunities,” Tse says. And in the current global environment, China warrants a closer look by investors.
Widening the reach into China
The country is keeping a decent growth rate and social stability on the mainland remains intact. And China-related stocks and bonds are relatively attractive.
The Chinese government has continued to pursue deeper integration with the global financial system by establishing various policy initiatives to allow a greater degree of renminbi convertibility under the current account. These initiatives include Bond Connect, Renminbi Qualified Foreign Institutional Investor, Qualified Domestic Limited Partnership (QDLP), Stock Connect and the Mutual Recognition of Funds (MRF) between Hong Kong and China.
In addition to institutional and professional investors in the mainland, Value Partners is also keen to offer its products and services in the retail space. The company hopes to launch its first MRF product before year’s end, Tse says. It will be rolled-out through its distribution partners, including Bank of China and China Merchants Bank, as well as some insurance and wealth management companies, securities firms and online platforms.
Apart from equity investments, Chinese mainland investors are also interested in low-risk investment schemes, including US dollar-denominated fixed income instruments. In 2015, Value Partners has launched a preference share fund and different kinds of fixed income products through the QDLP quota it won last October, and those are well-received by investors.
A foothold in Europe
Chinese investors are also increasingly embracing the investment strategy of holding a portfolio that’s diversified across a number of countries to mitigate persisting volatility of the markets.
The wealth of high-net-worth individuals in China has been growing steadily in recent years and they are expected to increasingly allocate their assets overseas for higher investment returns, according to the China Private Banking 2016 report by China Industrial Bank and the Boston Consulting Group.
“Chinese investors are looking at any and every available investment opportunity from stocks to bonds and other debt instruments, commodities and even bitcoins,” says Tse. And only a fraction of China’s wealth is allocated overseas.
In the next five years, the proportion of China’s personal investable assets allocated overseas will increase to 9.4% from 4.8% currently, according to the China private banking report. This represents a market opportunity of an additional RMB13 trillion ($2 trillion) of assets under management.
To tap the growing opportunity, Value Partners is looking into establishing a presence in London to be better placed to offer research and investment expertise to mainland Chinese investors seeking to allocate globally, Tse adds. The firm currently has offices in Beijing, Shanghai, Taipei and Singapore. A presence in Europe would also give the company better access to global clients with keen interest in China.
“There is no doubt that the Chinese economy is slowing and market volatility continues to rattle investors,” says Tse. “But even with such uncertainties, there is still a large pool of surplus savings and wealth in China and for us, this means vast opportunities.”