Vanguard secures first RQFII licence in Australia

The CSRC has awarded Australia's first RQFII licence to a Vanguard subsidiary. And with the renminbi scheme expanding rapidly, last week Deutsche revealed it had received Germany's first licence.
Vanguard secures first RQFII licence in Australia

Vanguard has become the first fund house in Australia to receive an RQFII licence, and is now waiting for a renminbi quota.

With the expansion of the system allowing foreigner investors access to Chinese stocks and bonds picking up pace, last week Deutsche Asset & Wealth Management (Deutsche AWM) revealed it was the first fund house in Germany to receive a renminbi qualified foreign institutional investor licence.

US index fund giant Vanguard has received its first RQFII licence through overseas subsidiary Vanguard Investments Australia on March 2, according to the China Securities Regulatory Commission (CSRC).

The world’s second-biggest fund house is unable to gain one through its American operation because the US is not part of the offshore investment programme.

As to why the Australian subsidiary applied for the licence, Rodney Comegys, Vanguard’s head of investments for Asia Pacific, explained that the unit is one of the group’s main global portfolio management centres and performs all regional trading.

Vanguard is now applying for an RQFII quota from the State Administration of Foreign Exchange (Safe), but Comegys declined to comment on how much it had asked for.

Deutsche AWM confirmed its RQFII success last week while Chinese vice premier Ma Kai was visiting Germany for bilateral financial talks. However, CSRC has not yet announced it.

“We wanted to have a full range of China products and this licence further helps to achieve our objective,” said Marco Montanari, Deutsche AWM’s head of passive asset management for Asia Pacific.

Deutsche AWM manages $4.87 billion of assets in funds with renminbi exposure. Much of this comes from its listed exchange-traded funds in Europe and the US, launched in partnership with Harvest Global Investments in London and New York. Such ETFs invest in onshore China equity via Harvest GI’s RQFII quota.

Both firms have also jointly launched an active-managed China bond fund which invests in offshore renminbi bonds. Deutsche AWM plans to move into onshore bond investments after it receives its quota. Torsten Harig, the firm’s fixed income product specialist in the global client group, said he expected onshore bond funds to be launched in the second half of this year.

The RQFII scheme was expanded to Germany in July last year with a total quota of Rmb80 billion ($12.8 billion), and was then launched in Australia last November with a total quota of Rmb50 billion.

After its original launch in Hong Kong in December 2011, the scheme has expanded rapidly, with Korea being one centre seeing significant demand from managers. In February, Shinhan Investment Corporation, Heungkuk Asset Management and MY Asset Investment Management received licences from CSRC, adding to Korea’s total of 14 licenced RQFII managers.

An additional five managers have received RQFII licences from CSRC over the past month, including the Hong Kong offices of Invesco and Keywise Capital; the Singapore offices of Aviva Investors Asia and Target Asset Management; and the London branch of China Construction Bank.

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