Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
SSgA consummates Chinese funds management JV
(Pictured: James MacNevin)
State Street Global Advisors (SSgA) has confirmed the board and senior management of its new Chinese joint venture, SSGA Fund Management Co Ltd, which will be 51 per cent owned by Zhongrong International Trust Co (ZRT).
The new funds management firm, which will be based in Beijing, will be focused at least initially on investing within China for Chinese investors across the retail and institutional markets. General manager, Li Xuesong, has joined SSGA from Bosera Fund Management, where he was deputy general manager for more than 10 years.
State Street has a long history in China, especially in securities services. It employs about 1,300 people in its wholly owned Hangzhou IT and admin business. But SSgA has been marketing its strategies to the mainland, from offshore, for many years. The company established, for instance, the first ETFs in China on behalf of China Asset Management Co, the largest funds manager on the mainland.
The Chinese managed funds market is still small, estimated at about US$400 billion in retail and about US$600 billion in institutional including the two largest funds, NCSSF and CIC, as well as insurance company money. And most of the distribution for funds management products in China is tied up by the five major Government-owned banks.
Nevertheless, with the rapidly rising middle class and strong savings culture, most foreign firms are keen to get a foothold in the highly regulated market.
Down the track, SSgA could benefit, also, from the joint venture expanding into offshore investing, assuming it is able to obtain a QDII quota.
James MacNevin, SSgA chief administration officer for Asia Pacific, said Li Xuesong had recruited his funds management team but SSgA would be happy to provide insights and other assistance.
“It’s a genuine local funds management business and so they wanted a local team who can understand the market,” he said. “They will build a credible investment capability.”
The proposed roll-out of strategies and products is likely to be determined by management in the coming months.
