Investec cautiously weighs China options

BEIJING – South African fund house Investec, which derives more than half of its US$50 billion under management from abroad, is scouring China for opportunities but is cautious about jumping in, its chief executive said on Friday.

While its main focus is on South Africa, Europe and Britain, Investec Asset Management has made inroads into Taiwan and Hong Kong, which have generated more than US$500 million in new business annually over the past two years, said Hendrik du Toit. In those markets, the Cape Town-based firm has sold mutual funds through local distributors.Its exposure to mainland China to date has been limited to purchasing instruments easily accessible to foreigners, given the complexities for a mid-sized firm of 500 employees to do more.”We’re exploring because you cannot ignore the opportunity,” he said in an interview.”China is clearly on the radar screen.”Investec, an arm of Investec Plc, had looked at the possibility of a local fund joint venture.But Du Toit said the firm would make a move only if the partner was right and if Investec could ensure maximum control.More than 20 foreign firms have set up joint fund ventures in China with stakes of up to 49 per cent, the maximum allowed by Beijing.Some US firms have baulked at high entry costs and limits on ownership control despite bullish market predictions.Consultants Mercer Oliver Wyman reckon the value of assets managed by institutional investors in China could grow to more than US$2 trillion by 2015 from US$335 billion now.Official data shows that assets managed by fund managers in China have ballooned to about US$65 billion from virtually zero six years ago.For the Cambridge alumnus, the ideal way into mainland China would be through partnerships with local firms that could distribute Investec products.Under current regulations, however, funds distributed in China must be domiciled in China.Smaller but wealthier countries such as Australia were likely to offer richer pickings than China for a long time to come.Still, du Toit said China would become a “very significant” investment destination as the structure of its stock and debt markets improved.Investec has not yet applied to invest in Chinese securities through the country’s Qualified Foreign Institutional Investor (QFII) programme.About 50 overseas firms have secured the right to invest in China under QFII, including the investment fund of Yale University in the United States that secured a US$50 million quota in August.Du Toit said China was also proving fertile ground for developing the kinds of contacts that would allow Investec to detect winning investment strategies in Africa.Chinese investors have flocked to Africa partly to secure supplies of oil and minerals to fuel its breakneck growth.Nampa-ReutersIn those markets, the Cape Town-based firm has sold mutual funds through local distributors.Its exposure to mainland China to date has been limited to purchasing instruments easily accessible to foreigners, given the complexities for a mid-sized firm of 500 employees to do more.”We’re exploring because you cannot ignore the opportunity,” he said in an interview.”China is clearly on the radar screen.”Investec, an arm of Investec Plc, had looked at the possibility of a local fund joint venture.But Du Toit said the firm would make a move only if the partner was right and if Investec could ensure maximum control.More than 20 foreign firms have set up joint fund ventures in China with stakes of up to 49 per cent, the maximum allowed by Beijing.Some US firms have baulked at high entry costs and limits on ownership control despite bullish market predictions.Consultants Mercer Oliver Wyman reckon the value of assets managed by institutional investors in China could grow to more than US$2 trillion by 2015 from US$335 billion now.Official data shows that assets managed by fund managers in China have ballooned to about US$65 billion from virtually zero six years ago.For the Cambridge alumnus, the ideal way into mainland China would be through partnerships with local firms that could distribute Investec products.Under current regulations, however, funds distributed in China must be domiciled in China.Smaller but wealthier countries such as Australia were likely to offer richer pickings than China for a long time to come.Still, du Toit said China would become a “very significant” investment destination as the structure of its stock and debt markets improved.Investec has not yet applied to invest in Chinese securities through the country’s Qualified Foreign Institutional Investor (QFII) programme.About 50 overseas firms have secured the right to invest in China under QFII, including the investment fund of Yale University in the United States that secured a US$50 million quota in August.Du Toit said China was also proving fertile ground for developing the kinds of contacts that would allow Investec to detect winning investment strategies in Africa.Chinese investors have flocked to Africa partly to secure supplies of oil and minerals to fuel its breakneck growth.Nampa-Reuters