Fidelity International raises $700 million in its first China bond mutual fund

SHANGHAI/SINGAPORE (Reuters) -Fidelity International has garnered 5 billion yuan ($700 million) from investors for its first fixed income mutual fund in China, deepening the asset manager’s involvement in the $3.8 trillion mutual fund market.

Its China Managing Director Helen Huang told Reuters in an interview Fidelity is lobbying Chinese regulators to relax stringent data security rules to allow cross-border sharing of research so that it can better utilise its growing capabilities in the country.

    The bond fund – Fidelity’s second mutual fund product in China – raised the sum mainly from institutional investors in a three-week, shortened subscription period, the money manager said.

China’s mutual fund industry is crowded with over 150 players, including foreign ones such as BlackRock (NYSE:), Schroders (LON:) and JPMorgan Asset Management.

    “The fundraising size is rather encouraging,” due to tough competition in the local market and Fidelity’s limited track record in China, said Huang, who heads Fidelity International’s two-year-old China mutual fund unit.

    Over 200 bond products have been launched in China this year, which raised 2.28 billion yuan on average. Rival Neuberger Berman raised 4 billion yuan in its first bond product in China in March.

The new fund mainly invests in government bonds, and Fidelity International aims to gradually broaden its fixed-income offering in China to include investments in corporate bonds, green bonds, and even convertibles, said Alvin Cheng, portfolio manager at FIL Fund Management (China) Co Ltd, the China unit.

DATA SECURITY

Fidelity International was formerly the international investment arm of Boston-based Fidelity Investments before being spun off. It manages more than $700 billion.

Huang said Fidelity International will broaden its product lines in China and capitalise on the group’s global strength in pension management and sustainability investing.

    But Fidelity has not been able to fully exploit its capabilities in China due to the country’s data security rules, which restrict export of information Beijing considers sensitive.

    Currently, research data and reports generated by the asset manager in China cannot be transferred offshore.

“Our proposal is that we hope regulators would allow us to share the fruit of our research within the group,” Huang said.

    ASIFMA, the financial lobby group, has also said that China should allow cross-border sharing of information by financial firms operating in the country.     

    “Regulators are seriously discussing the matter …and we are optimistic toward possible changes,” Huang said.

    Fidelity is patient in its business expansion, she said, as the asset manager lays the groundwork in China for multi-asset allocation, seeks a license to help Chinese invest offshore, and eyes a share in the country’s pension market.

The China Securities Regulatory Commission, which oversees the country’s asset management industry, did not immediately respond to an emailed request for comment.

($1 = 7.2111 renminbi)