HFT looks overseas in bid for asset growth

Mutual fund manager aims to double its assets just as market sees large withdrawals

PUBLISHED : Monday, 10 June, 2013, 12:00am
UPDATED : Monday, 10 June, 2013, 5:14am

Mainland retail investors are making heavy withdrawals from their mutual fund investments amid poor returns from the share market, but HFT Investment Management, one of China's oldest mutual fund managers, is looking to more than double its assets in three years.

The fund aims to grow assets under management from the current 85 billion yuan (HK$105.81 billion) to more than 200 billion yuan by the end of 2016, hoping to tap overseas institutional investors to fill the gap resulting from the outflow of domestic retail investors, said chief executive Tian Rencan.

"Now is a most challenging time for Chinese fund managers," Tian told the South China Morning Post in Singapore, where he attended the BNP Paribas Investment Partners Asia-Pacific Investor Summit last month. Profit margins, which now stand at around 40 basis points, would fall further as management fees would be lowered to retain customers, he said.

But even with cheaper fee structures, it will be hard to retain retail investors when some wealth management products in China offer annual returns of 5 to 6 per cent. Faced with a challenge of survival, Tian is betting on foreign investors' understanding to help his fund house grow.

The ambitious growth plans come as institutional investors are withdrawing their allocated QFII quotas from the A-share market in China. According to Z-Ben Advisors, there was US$89 million worth of drawdowns in the QFII quota in May - either the result of managers deliberately reducing their exposure to the A-share market, taking investment gains by repatriating, or simply an inability to raise funds.

Tian, who has been in charge of one of the first Sino-foreign fund management joint ventures in China for over a decade, witnessed the previous rapid growth of assets under management. "Ten years ago, banks queued to be our distributors," he said.

Now fund houses are fighting for banks to distribute their products and more players are coming to the market seeking capital from overseas investors to conquer domestic capital flight, Tian said.

"The rapid growth in [assets under management] we witnessed before 2007 will not come back. The market will be more rational and the next trend is for Chinese money managers to go institutional," he said.