In a significant move, Fidelity International has successfully raised 5 billion yuan ($700 million) from investors for its inaugural fixed-income mutual fund in China. This development marks a deeper foray into the country’s expansive $3.8 trillion mutual fund market for the global asset manager. The bond fund, Fidelity’s second mutual fund product in China, accomplished this feat mainly through institutional investors during a three-week, truncated subscription period.
China’s mutual fund industry boasts over 150 participants, including notable foreign players like BlackRock, Schroders, and JPMorgan Asset Management. Fidelity’s achievement is particularly noteworthy amid tough competition and its relatively limited track record in the Chinese market, according to Helen Huang, Fidelity International’s China Managing Director.
Huang expressed optimism about the fundraising size, acknowledging the challenges posed by the crowded local market. Fidelity aims to expand its fixed-income offerings in China gradually, encompassing government bonds, corporate bonds, green bonds, and even convertibles, as highlighted by Alvin Cheng, portfolio manager at FIL Fund Management (China) Co Ltd, the China unit.
Despite this success, Fidelity International faces hurdles in fully leveraging its capabilities in China, primarily due to the country’s stringent data security rules. These regulations currently impede the export of information considered sensitive by Beijing, preventing the transfer of research data and reports generated by the asset manager in China offshore.
Huang revealed that Fidelity is actively lobbying Chinese regulators to ease these data security restrictions, seeking approval for cross-border sharing of research within the Fidelity group. The proposal aligns with efforts by the financial lobby group ASIFMA, which also advocates for allowing financial firms operating in China to share information across borders.
While discussing the matter, Huang expressed confidence, stating that regulators are seriously considering potential changes, and Fidelity remains optimistic about the prospects of such developments.
Fidelity International, having managed more than $700 billion, plans to diversify its product lines in China, capitalizing on its global strength in pension management and sustainability investing. The asset manager is pursuing a patient approach to business expansion in China, strategically laying the groundwork for multi-asset allocation, seeking licenses for offshore investment facilitation, and exploring opportunities in the country’s pension market.
As of now, the China Securities Regulatory Commission, responsible for overseeing the country’s asset management industry, has not provided immediate comments or responses to queries regarding these developments. The successful debut of Fidelity’s bond mutual fund in China reflects its commitment to navigating the complexities of the Chinese market and expanding its footprint in the rapidly growing mutual fund landscape.
