PortfolioHong Kong money managers may find going tough in selling products in China
“The mainland FMCs (fund management companies) will have a much easier time dealing with Hong Kong distribution than Hong Kong firms will on the mainland” - Z-Ben Advisors report
As Hong Kong money managers cheer the new mutual fund recognition scheme that will allow them to raise as much as 300 billion yuan in the onshore market, selling their funds on the mainland is unlikely to be a smooth process.
Domestic banks own the widest fund distribution network in China, but doubts about the speed, quality and reliability of that channel could seriously impede foreign money managers’ fundraising in the country, according to a report by the Shanghai-based research firm Z-Ben Advisors.
Hong Kong money managers are likely to raise 100 billion yuan from mainland investors by the year-end via the scheme, much less than mainland firms which are expected to raise 200 billion yuan or more from Hong Kong, it estimates.
“The mainland FMCs (fund management companies) will have a much easier time dealing with Hong Kong distribution than Hong Kong firms will on the mainland,” the report said.
According to the China Securities Regulatory Commission, around 100 Hong Kong funds and 850 mainland funds will be eligible to participate in the mutual fund recognition programme, which allows the funds on each side to sell up to 300 billion yuan of fund products in each other’s market, respectively.
The long-anticipated programme will require a fund to be domiciled in Hong Kong. General equity, fixed income, physical-only exchange traded funds and unlisted index funds will qualify for distribution.
The core challenge will be how foreign funds connect with end customers.