China’s Asset Managers Rushing to Launch Resource Investment Funds

SHANGHAI, (Reuters) – Chinese asset managers are rushing to launch funds that invest in natural resources and precious metals overseas, responding to feverish domestic demand for inflation-hedging tools.

Nine Chinese money managers, including the ventures of Schroders , JPMorgan and Societe Generale , are seeking regulatory approval for products that will invest in resources and commodities under the Qualified Domestic Institutional Investor (QDII) scheme.

The moves, which were disclosed by China’s securities regulator on its website, come after the successful launch of China’s first gold fund in January, which attracted huge investor interest.

“The enthusiasm of fund managers and the popularity of such products come from Chinese retail investors’ appetite for novel asset classes and their growing concern of inflation and the subsequent need to hedge it,” said Howhow Zhang, head of research at fund consultancy Z-Ben Advisors.

“While you are likely to see more innovation on the asset types side … I believe precious metal and energy will remain the most popular choice among Chinese investors.”

China’s inflation accelerated to a 34-month high of 5.5 percent in May, according to official data released on Tuesday, prompting the government to lift banks’ reserve requirement for the sixth time this year after the market close.

The rush to launch resources-focused QDII funds was also fuelled partly by the shortage of investment tools in China to counter inflation, such as gold ETFs.

The China International Fund Management Co, partly owned by JPMorgan, and Bank of Communications Schroders Fund Management Co both applied in June to launch funds that invest in global natural resources.

Fortune SG Fund Management Co, the fund venture of SoGen, and Hua An Fund Management Co in May submitted applications to roll out index funds that will invest in oil-related assets.

China launched QDII scheme in 2007 to channel Chinese money abroad and there are currently 38 QDII funds, most of which invest in overseas equities. (Reporting by Samuel Shen; Editing by Ken Wills)


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