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Swiss-based UBS Global Asset Management Wednesday announced that the China Securities Regulatory Commission has granted approval for a joint venture fund management company with the State Development Investment Corporation (SDIC).
The venture will be formed as a result of the purchase by UBS of a 49 percent stake in Shenzhen-based China Dragon Fund Management Co Ltd, affiliated with SDIC Hongtai Trust & Investment Co Ltd, a wholly-owned subsidiary of SDIC.
The new company, to be known as UBS SDIC Fund Management Co Ltd, will be registered in Shenzhen, Guangdong Province, with capital of 100 million yuan (US$12 million), said John Fraser, chairman and chief executive officer of UBS Global Asset Management.
This is the first time in the history of China's fund management sector that a foreign partner has been allowed to hold a maximum 49 percent stake in a Chinese fund management company.
"The equity transaction is under way in accordance with the regulations of the State Assets Supervision and Administration Commission," said Fraser.
The joint venture should be open for business once the equity transaction process is finalized, he said.
SDIC President Wang Huisheng said both parties are considering increasing the capital invested in their partnership.
"The establishment of the new venture indicates China is opening its financial market wider to the outside world," Wang said.
UBS SDIC Fund Management Co Ltd plans to launch new mutual funds to strengthen the range of products it offers.
UBS insiders say that as market liberalization continues, if regulations permit, the partners expect opportunities for discretionary mandates in areas including annuities and pensions.
Qualified foreign institutional investors and qualified domestic institutional investors will present additional opportunities for expanding the company's range of services, according to Donna Chan, Associate Director of UBS AG.
With its US$800 million quota, UBS has been the largest investor in the listed A-share market.
"We intend to get a new investment quota by applying to the State Administration of Foreign Exchanges," said Chan.
"China's strong economic development will provide a solid foundation for UBS' further business expansion in the Chinese market," Fraser said.
His words were echoed by Wang, who said: "The new joint venture is also an important strategic step for SDIC in this field. There is huge potential in China's capital market."
SDIC plans to become a first-class international investment shareholding company within 10 years, Wang said.
A board of seven directors, with two from UBS, two from SDIC and three independent directors, will oversee governance of the joint venture.
The new entity will seek to add value through the application of UBS' international best-in-class approach to investment research, portfolio management, risk management, sales and marketing.
(China Daily April 14, 2005)
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