Private and Public Funds Seek Investors; Foreign Capital Shows Signs of Returning to A-Shares

Recently, domestic public and private institutions have turned their attention to overseas markets. Several large public fund companies have frequently communicated with overseas asset management institutions to attract overseas funds to invest in domestic stocks, bonds, etc., through fund dedicated accounts, with customers mainly concentrated in the Middle East region; many private quantitative institutions have set their sights on the markets of Hong Kong, China, and Singapore, hoping to enhance mutual understanding with customers and thereby obtain incremental funds.

Foreign institutions generally believe that the cost-effectiveness of A-share investment is highlighted at present, and historical experience shows that market downturns are usually the best time for long-term layout and mining excess returns.

Public funds frequently go overseas for fundraising

Recently, China Securities Daily reporters have learned through research that several large public fund companies have frequently taken actions to go overseas. A public fund person introduced that the company attaches great importance to international business and has executives in charge of overseas business. Since 2023, the corresponding executives have frequently gone abroad to communicate and negotiate with overseas asset management institutions, hoping to develop overseas "orders".

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According to him, cooperation with overseas asset management institutions mainly aims to attract overseas funds to invest in domestic stocks, bonds, and other assets through fund companies, with a cooperation form similar to dedicated account management, with a high degree of customization, to meet the needs of overseas customers to the greatest extent. In terms of strategy, it is more inclined towards absolute returns. In terms of customer sources, it is currently mainly concentrated in the Middle East region.

Another top public fund channel person also told China Securities Daily reporters that the company has carried out overseas business and cooperated with some overseas institutions. At present, the amount of funds invested by overseas customers through the company is still relatively small. He said that although overseas customers' contribution to the company's management scale is not significant in the short term, developing overseas business is similar to developing individual pension business. Fund companies look to the future and hope to have breakthroughs in the future, starting from establishing cooperation, gradually expanding the scale. As long as they can continue to create returns for overseas customers, the funds entrusted to the company by overseas customers will naturally continue to increase, and overseas business will also make a greater contribution to the company's scale and profits.

He also said that expanding overseas customers and developing overseas business is a necessary path for domestic asset management institutions to develop into world-class asset management institutions.

In fact, domestic public fund companies started cooperating with foreign asset management institutions earlier. In 2016, since Yifangda Fund signed a cooperation memorandum with Dutch APG, the two parties have gradually carried out cooperation in pension management, asset management, and information technology exchanges. In 2017, the two parties announced the joint launch of the world's first pension management product that follows the international market's sustainable and responsible investment framework and standards and invests in China's A-share market. APG is the largest pension management company in Europe and one of the world's largest trust management companies.

This year, Yifangda Fund has also communicated and cooperated with several foreign asset management institutions. In February, Yifangda Fund signed a cooperation memorandum with Riyadh Capital, a leading asset management company in Saudi Arabia, and the two parties will carry out exchanges and cooperation in the investment field; in August, Yifangda Fund had in-depth exchanges with Itaú Asset Management, the second-largest asset management company in Brazil, and the two parties reached a consensus on further business cooperation in the future.

Quantitative private overseas roadshowIn addition to public funds raising funds overseas, many private equity institutions are also going abroad to seek capital. A reporter from China Securities News learned from the industry that recently, several quantitative private equity firms have started overseas roadshows, targeting foreign investors in Hong Kong, China, and Singapore.

A private equity industry insider said that many overseas investors have limited understanding of the mainland Chinese market, especially those from Singapore. Therefore, roadshows in Singapore are more focused on providing basic knowledge and popularization. In contrast, during roadshows held in Hong Kong, China, many investors have shown more enthusiasm. In addition, foreign institutions are also closely monitoring the impact of interest rate cuts by the Federal Reserve and the current undervalued A-share market, trying to find opportunities for early layout.

The director of operations of a private equity service company said that judging from the current development of the domestic private equity industry, it is still difficult for private equity institutions to "go global with investment strategies". At this stage, it may be more about "going global for fundraising", that is, introducing funds from overseas investors to invest in the A-share market.

Regarding the reasons for private equity groups going overseas, the aforementioned industry insider said that on the one hand, domestic institutions can continuously expand new business areas and new funding channels on the basis of existing business, seeking business iteration and upgrading; on the other hand, some foreign institutions have been paying attention to the Chinese market, just looking for the right opportunity to enter. At this time, going overseas for roadshows can deepen the understanding and recognition of domestic asset management institutions by overseas investment institutions, and also understand the changes in the attitudes of foreign capital towards the Chinese market, so as to seize opportunities at any time.

The cost-effectiveness of A-share investment is highlighted.

Sandy Huang, a senior market strategist at AllianceBernstein, believes that although the current investor sentiment is not high, historical experience shows that this is usually a good time for long-term layout and mining excess returns. He believes that first, several major historical bottoms of A-shares all occurred at times when valuations were low, such as in June 2005, October 2008, June 2013, and January 2019. The current price-to-book ratio of the CSI 300 Index is only 1.2 times, and the price-to-earnings ratio is only 10.8 times, both of which have reached the level of the historical bottom range. Second, from the perspective of the cost-effectiveness of stocks relative to bonds, A-shares have long-term investment value.

Manulife Asset Management believes that the current A-share market is mainly characterized by structural opportunities, with market sentiment and expectations not meeting expectations. It is optimistic about high-win-rate dividend assets and industries with fundamental support, including overseas, metals and agriculture with price increase expectations, and the clear industrial trend of artificial intelligence.

Neuberger Berman Fund said that it is expected that the A-share market will maintain a volatile trend in September, and there may be additional policies introduced later, and the market direction in the fourth quarter may change. In terms of industry allocation, Neuberger Berman Fund suggests that dividend assets should be used as a base, and growth targets can be chosen in technology. On the one hand, cash flow is king, and dividend assets such as banks, public utilities, transportation, and white appliances can still be allocated after the adjustment. The semi-annual report of A-share companies shows that industries such as electronics and communications have good performance. As one of the few sectors with expanding capital expenditure, they are expected to benefit from their own industry cycle and can pay attention to specific targets such as the internet, optical modules, and the smartphone chain.