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China's Stock-Picking Star Heads to America

China's Stock-Picking Star Heads to America

(Bloomberg) --

China Universal Asset Management Co., the $100 billion manager behind some of the nation’s best-performing equity funds, is looking to be the first among its peers to set up shop in the U.S. even as trade tensions persist.

The firm expects to open a wholly-owned U.S. unit this year, pending regulatory approvals, to raise money for investments in Chinese firms, according to Chief Executive Officer Zhang Hui. It plans to sell products linked to Chinese-listed stocks to U.S. investors and boost research on the U.S. market so it can buy shares traded in New York, especially China-related ones, he said.

Universal Asset aims to be a link for investors that “don’t necessarily have the resources to invest in China on their own,” Zhang said in a recent interview in Shanghai.

The trade dispute has raised pressure on China’s financial companies to increase their overseas presence and be a conduit for dollar funding to the country’s manufacturers, analysts have said. Meanwhile, China’s decision to internationalize its financial sector and press on with the opening despite tensions offers firms like Universal Asset the hope of a positive reception in the U.S.

A representative for Universal Asset declined to comment on the potential impact of trade frictions on its U.S. application, citing the sensitivity of the matter.

The chances of a comprehensive trade deal appear remote at next week’s G-20 summit, according to Tom Orlik, chief economist for Bloomberg Economics. Obstacles to expand into the U.S. will probably only increase if negotiations between the world’s largest economies are protracted, said Wenbien Shi, a Shanghai-based analyst at Yuanta Securities Co.

Ant Financial, Alibaba Group Holding Ltd.’s financial unit, failed to get a U.S. clearance last year to buy MoneyGram International Inc. China’s Finance Ministry said in late 2017 that China had urged the U.S. to push forward an application by China International Capital Corp. for a U.S. financial license.

“China’s financial institutions must set foot in the overseas market,” Shi said. “China’s manufacturers moved abroad and became multinational entities. It’s the turn of financial firms to provide financing for them rather than keep tapping local markets for loans and bonds.”

Better Returns

  • Universal Asset’s flagship Focus Growth Fund was second among China’s 214 major equity funds with a total return of about 223% in the past decade, compared with a 26% gain in the Shanghai Composite Index, according to data compiled by Bloomberg
  • China Universal Consumption Industry Fund gave investors the best five-year returns of 233% among peers, versus 58% for the benchmark
  • China Universal Advantage Fund returned 967% since its inception in 2005; the benchmark offered 223% over that period

Zhang says his firm understands China and can offer better long-term returns than rivals partly due to its home-grown portfolio managers. While foreign asset managers including BlackRock Inc. and Vanguard Group Inc. have set up onshore units to increase exposure to Chinese stocks, smaller players have limited access to China’s market, which has more than $14 trillion in assets.

Universal Asset managed about 700 billion yuan ($100 billion) in assets as of March and this month was ranked seventh by assets among 142 Chinese peers tracked by online financial information platform East Money Information Co.

“We also hope that one day we ourselves will become a sizable investor in the overseas markets,” Zhang said.

--With assistance from Russell Ward.

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net;Amy Li in Shanghai at yli677@bloomberg.net;Shin Pei in New York at spei@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Jeanette Rodrigues, Candice Zachariahs

©2019 Bloomberg L.P.

With assistance from Bloomberg