Chinese funds head to Ireland to crack Europe
Mainland fund managers start opening Dublin offices to get access Europe - and beyond
China's top fund managers are showing a strong appetite for opening back offices or having funds registered in Dublin, to pave the way to issuing fund products across Europe and even globally.
International investors' desire for fund products with an Asian focus, and an accelerating globalisation of the yuan, are luring mainland China's top fund management houses beyond their Hong Kong and mainland bases to look for more foreign investors.
"The awareness is pretty good. A Chinese fund is re-domiciling a Cayman Islands fund to Ireland," Irish Funds Industry Association (IFIA) chief executive Pat Lardner said, refusing to disclose more details.
Setting up a back office in a European country would allow Chinese fund managers to obtain a "European passport", the so-called UCITS, which allows fund mangers to operate and market products throughout the continent.
During his visit to Hong Kong earlier this month, Lardner met eight of the top 10 mainland fund managers, who among them account for 41 per cent of all the mutual fund assets on the mainland.
This included some of the big names, such as China Asset Management, E Fund, Harvest, China Southern Management, Bosera, GF and HuaAn Fund Management.
"In the next five years, you are going to see most of them will have set up fund structures that will allow them to gather capital internationally," Lardner said.
Around 40 per cent of global hedge funds are administered in Ireland.
"We don't rule out any possibility," said Renault Kam, director at GF Asset Management, which has not had any distribution in Europe yet.
"Europe has a lot of family offices and various financial institutions looking for attractive returns. The client base is big."
Instead of setting up an office, which can be costly, Army Yan, director of Shenyin Wanguo Asset Management (Asia), said his fund was "actively" looking for a local partner in Europe to help register its fund products.
Value Partners, one of Asia's largest asset management firms, launched its first UCITS fund through its Dublin base in June.
According to the latest data available, there were 57 mainland Chinese fund managers, which were handling 3 trillion yuan (HK$3.7 trillion), or US$482 billion, as of 2007. That is only around 4 per cent the size of funds in the US.
Z-Ben Advisors estimates that the total market size of financial products in China, as of 2010, was 92.5 trillion yuan, of which 71.8 trillion is in bank savings.
Z-Ben expects mutual funds to show the strongest growth among all financial products in China by 2015, reaching 6.9 trillion yuan.