US-based fund to up investment, client focus

US-based global investment firm Wellington Management will expand its investment and client coverage in China, a senior executive said, betting on the numerous opportunities in the Chinese market.

“As we navigate through a potential new norm of higher inflation and slower growth globally, we see an expansive canvas of opportunities painted across the Chinese market,” said Cary Zhang, managing director and general manager of Wellington Private Fund Management (Shanghai) Ltd, a subsidiary of Wellington Management in China.

China appears to be one of the few economies in the world free from inflation pressure while maintaining a relatively high GDP growth rate, thanks to its unique economic characteristics and independent business cycle, Zhang told China Daily in an exclusive interview.

“With the new norm of higher inflation and lower growth as a backdrop, we expect global allocators will recognize the diversification benefit and value in China.”

In the short term, Zhang said China’s domestic economic cycle may be nearing its bottom, providing hope for long-term outperformance, while in the longer term, the country has strategically planted seeds for economic success in crucial industries, like green technology, healthcare and information technology.

Wellington Management, therefore, views China as an area of opportunity with an attractive risk-reward profile based on current valuations, he said. “We believe the China market provides great alpha potential for active managers like us.”

Alpha potential refers to the ability of an investment to outperform the market or its benchmark due to unique advantages or strategies.

Among the large, deep and diverse opportunity sets offered by the Chinese market, Zhang said Wellington Management is particularly focused on areas such as renewable energy — including the sub-segments of clean technologies, green technologies and electric vehicles — as well as healthcare and the application of artificial intelligence.

Echoing Zhang’s confidence in Chinese financial assets, Meng Lei, China equity strategist at UBS Securities, said recently that he expects an 8 percent growth in earnings per share performance for the CSI 300 Index this year.

The CSI 300 Index closed about 1.2 percent lower at 3,502.79 points on Wednesday, but has risen over 2 percent since the beginning of the year.

Foreign capital registered a net inflow of 65.89 billion yuan ($9.12 billion) into A shares this year as of Wednesday via northbound trading of the stock connect programs between the Chinese mainland and Hong Kong exchanges, outnumbering 43.7 billion yuan for the whole year of 2023, according to market tracker Wind Info.

Looking ahead, Zhang said foreign asset management institutions like Wellington Management will see more opportunities and possibilities, as the pace of reform and opening-up of China’s capital market continues to accelerate.

“China is an important market, with long-term potential for the firm — and is an integral part of our Asia strategy,” he said.

Wellington Management opened up its first office in the Chinese mainland in 2008 and set up a wholly foreign-owned enterprise, Wellington Private Fund Management (Shanghai) Ltd, in Shanghai in 2019.

In 2022, the Shanghai-based company secured registration as a private fund manager of the Qualified Domestic Limited Partner (QDLP) program and has since launched two onshore private funds.

QDLP refers to an investment program that allows foreign fund managers to set up entities in China to raise money from mainland investors toward privately offered funds that invest overseas within an approved quota.

“We look forward to continuing to participate in the new journey of the two-way opening of China’s financial market,” Zhang said.