China's National Council for Social Security Fund (NCSSF) will pick approximately eight new fund managers from 29 qualified financial institutions to help with its securities investments.
The council extended on Friday a formal invitation to domestic institutions, including some joint ventures, to take part in bidding for new fund managers of the council.
In a circular published on the council's website, it was said that the council would pick up no more than eight new investment managers from the candidates. The choice will be made in a fair and transparent way according to relevant criteria and procedure, it said.
This is the second time that the NCSSF, the central mandatory body of more than US$16 billion strategic social security funds, will recruit professional fund managers to help with investment management, following a first attempt in 2002, which picked six domestic fund management firms.
This time, the council released a list of candidates that are regarded as qualified to participate in the first round of bidding for the management licences.
Altogether 17 fund management companies, including six joint ventures, and 12 domestic securities firms, are included in the list.
It is the first time for securities houses to take part in such bidding. The 12 securities firms are mostly large and medium-sized, including CITIC Securities, Guotai & Jun'an Securities and Haitong Securities.
All candidates are asked to hand in their application and relevant documents by next Tuesday. They will also undergo interviews after initial examinations.
A number of firms has already expressed their desire to apply for the licences once the procedure is announced.
A special expert committee will review the applications. The final result is expected to be announced in 45 working days.
As designated in a regulation on investment management of the national social security fund, the fund managers of NCSSF should have a minimum two years of business experience in asset management, with good operation records and reputations. This has disqualified fund management companies founded after 2002.
But the sphere of bidders is wider this time.
The participation of joint venture fund management companies is expected to bring fresh expertise to the investment rationale of the council, analysts said.
The ventures include ABN AMRO Xiangcai Fund Management, China Merchants Fund Management, Fortune SGAM Fund Management and GTJA Allianz Funds, all formed over the past two years after China opened the fund industry to foreign institutions.
These ventures are also exempted from the two-year-operational-record required for local firms to take part in the bidding this time.
NCSSF is widely regarded as a new institutional investor force in China's stock market. And it is also expected to be one of the first domestic institutions to enter the overseas capital market, since it has already received State Council approval for overseas investment in February.
But so far, the fund managers can only make securities investment for the council in the mainland, though the overseas markets are also tempting.
David Lin, president and chief executive officer of ABN AMRO Xiangcai Fund Management Co, said that the company is willing to offer its help if NCSSF wants to find professional fund managers to conduct its overseas investment in the future, given the overseas expertise and network of its foreign shareholder ABN AMRO Asset Management.
"We are willing to assist when NCSSF steps into the overseas markets," said Lin.
NCSSF put about 5 percent of its total assets for stock investments by the end of last year. It reported an overall return rate of 2.71 percent last year.
(China Daily August 28, 2004)