Firms compete to win funds
By Sun Min (China Daily)
Updated: 2004-08-26 09:25

About 30 fund management companies and securities houses, including some joint ventures, will compete in second round selections of the fund manager for China's National Council for Social Security Funds (NCSSF), sources said.

The council will soon release the criteria and procedure for selection and qualified firms will be able to bid, said Li Keping, director of Investment Department of NCSSF.

Most participants are expected to be fund management companies. A few securities firms will for the first time join the bidding for asset management licences granted by the council to help it conduct securities investment domestically, Li told China Daily yesterday.

Other kinds of financial companies are unlikely to take part this time.

Earlier reports have said that altogether 28 fund management companies and securities firms are likely candidates for the bidding.

Li said the figure is not set. The China Securities Regulatory Commission (CSRC) has provided a list of recommended firms that match the initial requirements, but all of them would have to compete on an equal basis according to designated procedures.

"We will release relevant information and documents about the bidding procedure on our website soon. Then qualified firms will be able to put in their applications to become our fund managers," said Li.

It is the second time for NCSSF to select fund managers from across the country. The council mandated 132.5 billion yuan (US$16 billion) of strategic reserve funds for the social security sector by the end of 2003.

Help from professional fund managers has made it a new institutional investor in China's stock market.

In December 2002, the council chose the first batch of six domestic fund management companies to help it with investment and authorized 31.9 billion yuan (US$3.9 billion) of assets for investment by the end of last year, NCSSF statistics said.

The council reported a 2.71 per cent annual return rate last year.

By the end of last year, stocks accounted for about 5 per cent of the council's total assets, while most other assets were put in as bank deposits and bond purchase. There has been a trend for the council to increase securities investments steadily.

Xiang Huaicheng, chairman of NCSSF, said in April that the council would put as much as 15 per cent of the assets into stock investment this year. It is also preparing for overseas capital investment after acquiring the State Council's approval in February.

All these require it to seek new fund managers.

David Lin, President and Chief Executive Officer of the joint venture ABN AMRO Xiangcai Fund Management Co, said the company would submit its application to become NCSSF's fund manager once the procedure and requirements of the bidding are announced.

Over the past few months, the council has sent out inspection teams to fund management companies and securities firms in major domestic cities to get a clearer picture of their fundamentals and initial investment proposals.

Lin said the company "had a smooth communication" with the council and introduced its daily operation, risk control and investment returns. The firm is confident about its own strength, he said.

A spokesman from GTJA Allianz Funds, a joint venture between the Shanghai-based Guotai & Jun'an Securities and Germany's Allianz, also said yesterday that the company is interested in taking part in the competition for the fund management licence of NCSSF.

Existing rules say candidates for the NCSSF's fund managers should have a minimum of two years' business experience in asset management with a good operational record.

Since then, a number of joint ventures have arrived in the fund management business in China and are likely to be exempt from the two-year-operational-record requirement this time, insiders said.

Other amendments will also be made on NCSSF's criteria to pick fund managers.

NCSSF is still expecting more detailed regulations to be enacted before it implements investment plans in its preparation for overseas investment.