HSBC Holdings Plc's Chinese fund arm aims to launch two new funds over the next year amid feverish demand for asset management services fuelled by a bullish local stock market, the venture's head said on Tuesday.
Steve Lee, chief executive of HSBC Jintrust Fund Management, said at the Reuters China Century Summit that the firm aimed to launch a 20-year life-cycle fund, its fourth product, this year to raise up to 10 billion yuan ($1.33 billion).
The balanced fund, designed for long-term investors, could double the size of HSBC Jintrust's assets under management, Lee said, adding that his firm was already running a 10-year life-cycle fund launched in May last year, the first such product in China.
HSBC Jintrust, 49 percent owned by Europe's biggest bank, currently manages three funds with a total net asset value of more than 11 billion yuan.
The existing life-cycle fund has returned 120 percent since its inception but remains small at less than 2 billion yuan as retail investors, who dominate China's 2 trillion yuan fund industry, favor riskier products, he said.
Lee said he hoped the firm's new life-cycle product, whose risk profile would be gradually lowered in the run-up to maturity, would attract buyers as they become more sophisticated.
Investors' expectations for returns are high. There needs to be an education process, he said at the summit, held at the Reuters office in Shanghai.
HSBC also plans to apply in May of next year for regulatory approval to launch a fund to invest client money in overseas financial markets under China's Qualified Domestic Investor Scheme (QDII), he said.
Chinese fund management companies, brokerages and banks are racing to launch QDII funds, a national scheme aimed at easing upward pressure on the country's currency and broadening investment alternatives for domestic investors.
China's A shares are not cheap following a bull-run that started in early 2006, but the market is not dangerously overheated given the strong earnings growth momentum of domestic listed firms, Lee said.
The price earnings/growth multiple of many Chinese A-share firms remains less than one, compared with three times for Japan's stock market when it peaked in the late 1980s, he said.
China is nowhere near that level. It is not outrageous yet, he said.
Lee said other priorities at his company were to retain talent, as competition for Chinese fund managers and analysts heats up, and to expand its distribution network.
As a fund management company, we only have two sets of assets: brand and people, Lee said. How to retain our talents, our team, is the biggest challenge at the moment.
Compensation for China fund managers has surged and job hopping is on the rise as financial institutions, from fund firms to insurers, step up the fight for Chinese investment professionals, he said.
The average annual salary of a fund manager in mainland China has topped 1 million yuan, twice what their industry colleagues make in Taiwan, Lee said.
HSBC Jintrust has just signed fund product distribution agreements with three financial institutions in China and is in talks to sign up another five banks, he said.
It had been relying mainly on Bank of Communications, in which HSBC holds a stake, to distribute its products until July, when it inked a deal with China Construction Bank, he said.