China's Dacheng Fund eyes Hong Kong expansion

China's Dacheng Fund Management Co aims to double its number of exchange-traded funds (ETFs) in Hong Kong next year and is planning to launch its first overseas fund for domestic Chinese investors, a senior executive said.
China's seventh-biggest fund house also planned to launch more hedge funds in Hong Kong as part of its overseas expansion, said Lian Shaodong, head of Dacheng's Hong Kong subsidiary.
"I see huge room to grow our international business and we aim to become a channel for cross-border investment," Lian, general manager of Da Cheng International Asset Management Co, said in an interview.
"Hong Kong is poised to become an offshore RMB (yuan) centre and it's a must for Chinese asset managers to expand abroad."
Having launched three ETFs in Hong Kong this year, Dacheng hopes to grow at a similar pace in 2011, potentially doubling the number of mutual funds to six by the end of next year.
The company, which launched an offshore hedge fund through a private placement in May, was planning more such products for 2011, which would pave way for selling actively managed funds to the public in the future, Lian said.
He added that the company expected to launch its first overseas investment fund under China's Qualified Domestic Institutional Investor (QDII) scheme in the first quarter of 2011.
Chinese fund managers are flocking to set up subsidiaries in Hong Kong, using the former British colony as a beachhead for overseas expansion amid growing foreign interest in Chinese assets.
Some fund managers are also preparing to launch yuan-denominated funds in Hong Kong, which Beijing hopes will become an offshore centre for yuan products.
Lian said that it might be premature to launch yuan funds in Hong Kong now because of a shortage of investment tools available there, and that Dacheng would first focus on boosting brand awareness in that market.
"It takes time to build capability, reputation and a track record in an overseas market, and launching ETFs is a shortcut to establishing a foothold in Hong Kong," Lian said.
Two Dacheng ETFs - one tracking the CSI HK Private-owned Mainland Enterprise Index, and the other tracking the CSI HK State-owned mainland Enterprise Index, started trading in Hong Kong on Monday.