In a significant move bolstering its position in the rapidly growing Chinese mutual fund market, Fidelity International has successfully raised 5 billion yuan ($700 million) from investors for its inaugural fixed-income mutual fund in China. This accomplishment marks a strategic expansion for the asset manager in a market valued at $3.8 trillion.

Helen Huang, Managing Director of Fidelity China, shared insights in an exclusive interview with Reuters, revealing the company’s efforts to engage Chinese regulators in discussions aimed at relaxing stringent data security regulations. Fidelity is advocating for the easing of rules to enable cross-border sharing of research data, thus optimizing its expanding capabilities within the country.

The bond fund, Fidelity’s second mutual fund product in China, achieved this significant fundraising milestone predominantly from institutional investors during a three-week, expedited subscription period. The competitive landscape in China’s mutual fund industry, boasting over 150 players, including global giants like BlackRock, Schroders, and JPMorgan Asset Management, makes Fidelity’s achievement particularly noteworthy.

Huang expressed her optimism, stating, “The fundraising size is rather encouraging,” acknowledging the challenging local market conditions and Fidelity’s relatively brief track record in China. As the head of Fidelity International’s two-year-old China mutual fund unit, she highlighted the intense competition, with over 200 bond products launched in China this year alone, averaging 2.28 billion yuan in funds raised.

Fidelity International, formerly the international investment arm of Boston-based Fidelity Investments, now operates independently and manages a portfolio exceeding $700 billion. Huang disclosed the company’s plans to diversify its product lines in China and leverage its global strengths in pension management and sustainability investing.

Despite Fidelity’s ambitious plans, challenges persist due to China’s stringent data security regulations. Huang emphasized the limitations imposed on the export of sensitive information, hindering Fidelity’s ability to fully utilize its capabilities in the country. The company is actively proposing regulatory changes to allow the internal sharing of research data within the group.

The financial industry is rallying behind such proposals, with ASIFMA, a prominent financial lobby group, advocating for cross-border information sharing by financial firms operating in China. Huang expressed confidence in ongoing discussions with regulators, stating, “Regulators are seriously discussing the matter… and we are optimistic toward possible changes.”

While pursuing its expansion agenda, Fidelity remains patient, laying the groundwork for multi-asset allocation in China, seeking licenses for offshore Chinese investments, and eyeing a share in the country’s pension market. The China Securities Regulatory Commission, overseeing the asset management industry, has not yet responded to requests for comments on these developments.

The fund is expected to provide investors with opportunities to access the Chinese bond market and diversify their investment portfolios. This move aligns with the broader trend of foreign asset managers seeking to raise funds in China, despite recent market volatility

Photo (JAMES PHILLIPPS)
21st November, 2023
Delino Gayweh
Serrari Financial Analyst