6 asset managers get nod for hybrid funds

Six Chinese asset managers received regulatory approval to float three-year hybrid funds focusing on listed unicorn companies (startups with a valuation in excess of $1 billion) on Wednesday, an indication of the further opening-up of China’s financial industry.

E Fund Management Co Ltd, Harvest Fund Management Co Ltd, China Merchants Fund Management Co Ltd, China Southern Asset Management Co Ltd, China Universal Asset Management Co Ltd and China Asset Management Co Ltd were the firms that got the clearance for three-year hybrid funds, the China Securities Regulatory Commission said on Wednesday.

The hybrid funds will mainly invest in Chinese Depository Receipts of Chinese unicorn companies listed in overseas markets, treasury bonds, local treasury bonds and AAA-rated corporate debt. The lock-in period of the fund is three years and it would be listed as an openended fund, which means investors can also transfer their shares at the bourses.

Industry insiders said the maximum financing amount of each fund will be about 50 billion yuan ($7.8 billion), while 5 billion yuan would be the lower limit. Individual investors can subscribe to the funds between June 11 and June 15, and institutional investors on June 19.

Large-scale State-owned enterprises, insurers, and national investment funds, and investors with good reputation and market influence will be the main priority for institutional investors.

“It is an important indication of China in further opening up its financial industry,” said Ma Wenya, general manager of Sunday Fund Co Ltd, a Chengdu-based asset management company.

Ma said hundreds of billions of yuan are expected to flow into the A-share market to increase liquidity.

“The new funds will boost liquidity in the A-share market and lend more stability to the capital market,” said Ma.

Dong Dengxin, a finance professor at the Wuhan University of Science, said hybrid funds with lock-in periods are an innovation of Chinese asset management companies.

“Long-term funds can play an important role in decreasing market volatility and ensuring satisfactory investment returns for investors,” said Dong.