BlackRock raises $1bn for first foreign-run China mutual fund
BlackRock has raised Rmb6.7bn ($1bn) for its first mutual fund in China, as the world’s biggest asset manager presses ahead with its expansion into the country’s lucrative savings market despite concerns over the political climate.
The US company, which became the first global group to gain approval for a wholly owned Chinese mutual fund business in June, said it closed fundraising a week earlier than expected and brought in more than 110,000 investors.
BlackRock’s move is part of a wider push by international finance into China’s rapidly growing $19tn asset management market, even in the face of rising geopolitical tensions with the US.
But its latest announcement came after a dramatic recent shift in tone from Beijing, where President Xi Jinping’s administration is seeking to tighten the Chinese Communist party’s grip over industries from tech to education and has unveiled a “common prosperity” drive to redistribute wealth.
A regulatory crackdown on Didi Chuxing in July hit the ride-hailing company’s shares days after its $4.4bn initial public offering in New York, while a ban on for-profit tutoring wiped billions off the value of US-listed Chinese education groups.
News that BlackRock had completed its fundraising came one day after George Soros, the billionaire financier, wrote in The Wall Street Journal that the asset manager’s move into China was a “tragic mistake”.
Soros specifically cited the launch of its mutual fund business and warned that the common prosperity programme “does not augur well for foreign investors”.
“Xi regards all Chinese companies as instruments of a one-party state,” Soros wrote in a column for the Financial Times last week, warning that investors in China would face “a rude awakening”.
Rachel Lord, who was appointed BlackRock’s head of Asia-Pacific this year and will oversee the group’s expansion in China, said in a statement that the asset manager was “excited to be able to contribute our investment and risk management expertise to help make investing easier and more affordable for Chinese investors”.
The recent imposition of social and commercial restrictions in China, including on video gaming, has coincided with a long-term liberalisation of the country’s financial system, reflected in Beijing’s willingness to allow foreign companies to fully own mutual fund businesses. In the past, asset managers were forced to co-operate with a local joint venture partner.
The regulatory interventions have raised fears over listings of Chinese companies in the US, which operate through depositary receipts. Most of BlackRock’s $19bn stake in Alibaba’s American depositary receipts were converted to its Hong Kong shares in June as a result of a change to the way an MSCI index incorporated the Chinese ecommerce group.
As well as its mutual fund business, BlackRock received approval in May for a majority-owned wealth management business in partnership with China Construction Bank and Temasek, Singapore’s state fund.
Goldman Sachs unveiled a joint venture the same month with Chinese lender ICBC in wealth management, a sector in which foreign participants are seen as one way of improving standards.
When it announced the mutual fund launch, which caters to onshore investors, in August, BlackRock said it would “seek long-term capital appreciation via a total returns strategy that takes a long-term investing approach, backed by in-depth research into individual stocks and stringent risk management controls”.
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