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Asia and China fund manager

Asia and China fund manager
We see significant growth in global asset management (AUM) in 2019. However, fund managers are also facing the challenge of declining management fees and increasing operating costs, and the profitability of the fund industry is under great pressure. During the COVID-19 epidemic in 2020, fund managers faced a decline in assets under management. To be in the fund management business in today’s competitive environment, fund distribution has become a key success factor for managers. As Asian (including Chinese) fund managers have extensive experience in investing in the Chinese market, some of them are actively preparing or considering the establishment of Luxembourg-based funds and management structures to provide appropriate investment vehicles for European investors to invest in China’s capital markets and alternative investment assets.

In this third article in the Luxembourg Funds series, we will provide an overview of the current distribution of funds in Europe and the factors that Asian asset managers should consider when entering the European market.
1) What are the distribution trends of regulated investment funds and alternative investment funds in Europe?
Ucits are regulated funds that invest primarily in secondary market securities that can be sold to institutional and retail investors within and outside the EU, providing them with a large pool of potential investors. Given the current low interest rate market environment, retail investors and institutional investors (especially pension funds) continue to invest money in funds, seeking more stable returns in a volatile investment environment. Ucits sales appear to have been unaffected during the outbreak and remain popular with investors.

There is also demand for alternative investment funds (AIFs). AIF is primarily distributed to qualified investors (such as high net worth individuals and institutional investors) around the world. We are seeing general investor interest in real estate assets, particularly in Europe, the UK and the Middle East.

Investors are also interested in investing in private equity funds. They are willing to take higher risks in exchange for higher returns over a longer investment period. Private equity funds have suffered to some extent because many deals were delayed during the outbreak.

2) According to international statistics released by the European Fund and Asset Management Association in June 2020, Luxembourg is the second largest investment fund center in the world after the United States. Why is Luxembourg more popular with fund managers than any other country?
The political and economic environment in Luxembourg is very stable. The Luxembourg regulator is pragmatic and focused on economic development and is committed to promoting the healthy development of its financial services sector, such as funds and fintech. Luxembourg’s triple-A credit rating is a key element for fund managers and institutional investors to screen and target their investments. For example, some pension funds, such as those in Latin America, attach great importance to the credit rating of the domicile of the fund when making investment decisions.

For international investors, compared to other offshore fund center, Luxembourg funds (including UCITS and AIF) legal system and regulation to protect the interests of the investors, so many international investors more confidence to Luxembourg investment fund, when fund managers around the world or European investors consider raising, Luxembourg, become the natural choice registered fund.

In addition, Luxembourg’s tax regime and extensive network of tax treaties also benefit the onshore fund and fund management industry, thus encouraging global fund managers to set up funds and fund management vehicles in Luxembourg for global investment and enhancing investor returns through legal tax planning.

3) Luxembourg’s UCITS and Alternative Investment Fund (AIF) have achieved excellent sales in Europe. How is it doing in Asia?
We observe that Asian investors seem to be more interested in AIF than Ucits due to its higher expected return on investment, with real estate, infrastructure and credit assets as the target of the AIF attracting more attention. But for now, Asian investors are investing mainly in Ucits assets, with a relatively small amount under management invested in AIF.

4) What are the opportunities for Chinese fund managers?
Global investors seek a diversified portfolio. In recent years, more international investors are interested in investing in the Chinese market. In view of this, Chinese fund managers can take advantage of their rich investment experience and understanding of the Chinese market to actively participate in the China-themed investment portfolio and provide investment management and advisory services. In addition to the return on investment in the fund products, the ability to provide investors with a sustainable fund holding and fund management structure is also a key factor for international investors when making investment decisions.

Although investors who are interested in a theme funds to invest to China, but due to the funds may not be in front of the investment by foreign institutional investors conducted internal assessment on investment fund and comply with the relevant standards (including fund managers track record, asset management, scale and fund compliance, etc.), the institutional investors need to give up the investment opportunity. Foreign institutional investors usually require funds to provide information on the investment level of the fund, and investors enjoy the same investment rights.

To attract EU investors when investing in Chinese assets, fund managers could consider using internationally recognised Luxembourg-based funds. With a well-established regulatory framework, Luxembourg funds can provide investors with the protection they need.

5) What recommendations do we have for Asian fund managers to be successful in Europe if they want to distribute their fund products in Luxembourg?
Given the differences in fund sales across Europe, we recommend that fund managers in Asia should have a thorough understanding of the distribution channels of the countries (regions) in which they intend to sell funds and the behavioral preferences of investors in those countries, and keep in touch with local distribution personnel to obtain the information of the local fund market. Fund distribution is often the first window of engagement with investors to fully understand the strength of the fund manager and to create a customer-centric, relations-driven business model. Only by building closer and deeper relationships with customers can a customer-centric business model be realized.

In addition, brand promotion, good performance, local presence and economic substance are all key factors for a successful fund management business in Europe.

If a fund manager is considering raising money from global investors or developing a global investment strategy, Luxembourg is also one of the possible locations for funds and fund management vehicles.

Black swan raid! Global market crash

Britain’s mutant new crown virus “out of control” panic spreads in global capital markets

On Monday, the spread of the British epidemic caused by a mutated virus strain put pressure on many countries around the world. Following the announcement of the suspension of flights and trains from the United Kingdom by the Netherlands, Belgium, and Italy, as of now, more than 40 countries around the world including France and Germany have also taken actions to try to prevent the spread of super-virulent strains. A chill swept across the global capital markets, and the Panic Index (VIX) rose nearly 30%, the highest level since December 14.


The three major U.S. stock indexes fell across the board at the opening, and travel and leisure stocks were hit hard

In the United States, affected by the intensification of the epidemic, the three major stock indexes fell more than 1% at the opening, and the Dow plunged 400 points during the intraday session. After midday, it was boosted by the constituent stocks and turned to rise. At the close of the market tended to ease, the Dow reported 30216.45 points, a slight increase; the Nasdaq and the S&P 500 fell 0.1% and 0.39% respectively.

In terms of sectors: aviation stocks and chip stocks collectively suffered heavy losses, and travel and leisure stocks sensitive to the epidemic bottomed out. Among them, American Airlines fell more than 4%; Intel, Micron, and Western Digital all fell by 2%. On the other hand, most of the large bank stocks are bullish. Stocks like Goldman Sachs and JP Morgan Chase climbed 4% because the Fed allowed banks to buy back stocks after the stress test. Among the constituent stocks, Nike and Microsoft rose more than 1%.

Tesla officially included in the S&P 500 index, and its stock price fell more than 6% that day

Several stocks have received attention. While Airbnb fell more than 7%, Tesla fell 6.49%. Tesla shares were officially included in the S&P 500 index on Monday, with a closing price of $649.86. Apple’s stock fell 2% at one point after Apple closed its stores in California. After midday, it bottomed out and rebounded, closing at $128.23 per share.

Investors flock to safe-haven assets, international gold prices rise and fall

Analysts interviewed by Reuters believe that risk sentiment is pushing investors toward safe-haven assets such as gold, and the price of gold once rushed to a six-week high ($1,890 per ounce). The price of gold futures on the New York Mercantile Exchange fell back at the close of trading on the 21st, reporting $1,882.8 per ounce, a decrease of 0.32%.

Three major European stock indexes suffered heavy losses

Due to the sudden turn of the epidemic situation in the UK, the three major stock markets opened lower and lowered. At the close of the market, the German DAX index fell nearly 3% to close at 13,246.30 points, a drop of more than 380 points. The UK and French stock markets fell by 1.73% and 2.43% respectively, almost paring back nearly a month’s gains. Banking stocks led the market, causing the European Stoxx600 index to close down 2.3%. In addition, the exchange rate of the British pound against the U.S. dollar fluctuated on Monday, ranging from 1.2% to 2%, and is currently trading at the level of 1.34-1.35.

Russia may support the reduction of production scale, international oil prices plummet

Also affected by the epidemic was the international oil price, which fell below a critical level during the session. At the close of the market, the New York WTI light crude oil for delivery in January next year closed down, with a drop of more than 2%, at $47.74 per barrel. Brent crude oil futures fell 2.58% to $50.91 per barrel.

The latest news shows that although the epidemic counterattack has caused the market to worry about reduced demand in the oil market, Russia said it may support further reductions in production in February, and it is expected to increase production by 500,000 barrels per day. It is not yet clear whether OPEC and major oil-producing countries, Saudi Arabia, support Russia’s position, and oil prices are expected to fluctuate slightly in the short term.

A financial poisonous Ant?

The second hurdle is finance. Ali must change his genes to pass.

2020 is another critical year for Ali. The epidemic is good for the Internet, but the policy is not. Time changes, Ali cannot be as bullish as in 2015.

Looking at the search index, you will know that even the media that Ali has voted for are neutral articles, and even broke Ali’s anise. Similar to the fact that the private life of the former Ali prince Jiang Fan was completely blocked, it will never happen again.

At every critical moment, there must be a class action lawsuit in the United States.

In the last war, investors accused Alibaba of failing to disclose matters that had been warned by the State Administration for Industry and Commerce before listing, and eventually paid 250 million US dollars to reach a settlement. This time, because the Ant Group suspended its listing, American investors in Ali became angry. It is estimated that some people rushed to the vegetable field with their sickles. Unexpectedly, they disappeared, emotionally and profitably.

On November 13, Alibaba US stock investors filed a lawsuit in a New York court, accusing the company and its executives of making material false or misleading statements during the IPO process of Ant Group.

Now the key is not whether Ant can be listed, but the financial model of Ant is unsustainable and revenue will drop sharply.

The suspension button of Ant Group’s listing was pressed, and the Banking and Insurance Regulatory Commission of the People’s Bank of China issued the “Interim Measures for the Management of Online Small Loans (Draft for Comment)”.

Originally, people were eating hot pot and singing. Now, the hot pot is taken away, and the person who eats the pot looks blank.

This scene is frozen in history.

Ant’s original small loan model must, must and will definitely change. The leverage is too high, too big to fail, too risky, and unfair competition with other financial institutions.

Mr. Huang Qifan facilitated the cooperation with Jack Ma when he was in Chongqing. He knew ants.

Huang Qifan said: “Ma Yun spent hundreds of billions of dollars and borrowed them. Where did the money come from? First bank loans and then ABS. Huabei and borrowed more than 3 billion capital funds reached more than 300 billion, a 100 times magnification.”

“This 100 times loan is okay. His more than 3 billion loans were loaned at a ratio of 1:2, and the bank gave him 5 or 6 billion loans, forming about 9 billion. Then he went to the capital market to engage in ABS, because we The conventional capital market does not stipulate the number of cycles for issuing ABS. For a conventional small financial institution, if a loan of 1 billion is issued, it may take a year to issue ABS with a loan of 1 billion. Years have passed, and the first round of assets has long been recovered.”

The whole process is not illegal.

At that time, Huang Qifan’s five requirements to Ma Yun were:
First, the source of capital must be capital injection from the parent group, not from netizens like P2P;
Second, the money of small loan companies should be loaned to the customer chain, not to unrelated netizens;
Third, loan funds must be borrowed and financed at 2.3 times as required by the China Banking Regulatory Commission;
Fourth, the source of subsequent loan funds can be through compliant ABS financing;
Fifth, the business can radiate to the whole country, but the headquarters must be registered in Chongqing.

These five items have delayed the thunder explosion for Xiaodai, or even no thunder explosion.

In order to control risks, the central bank has decided that ABS can only be cycled 5 times at most. In fact, it is mainly determined by each locality. In 2012, Chongqing stipulated that the scale of microfinance operations was up to 2.3 times larger.

The 2017 new regulations have two restrictions that have the greatest impact on ABS: ABS will no longer be listed and included in the on-balance sheet supervision; ABS financing will be included in the leveraged operation ratio.

The new ABS regulations are not fatal to ant small loans, there are many smart people, and the problem is easy to solve.

Huang Qifan explained the workaround, increasing the funds of Ant Small Microfinance Company and Ant Merchant Credit Company from 3 billion to more than 10 billion. Through bank loans, it can still obtain more than 50 billion of funds, and then pass up to 5 rounds of ABS. , Can also get 300 billion funds.

Under the new regulations on cash loans, Ants consciously reduced the scale of ABS. Data from the Shanghai Stock Exchange’s debt information platform show that since the end of 2017, the issuance scale of the Ant ABS project has dropped from 30 billion yuan to 10 billion yuan.

The scale has declined, and the operation continues. On November 24, the Shanghai Stock Exchange’s debt project information platform showed that two ABS projects under Ant’s display status were approved.

However, these methods cannot solve the problem of joint loans with banks. The bank follows the ants and provides money to the ants, and everyone who has money makes it together.

On November 2, the China Banking and Insurance Regulatory Commission promulgated new regulations on online loans. The balance of microfinance companies operating online microfinance business through bank loans, shareholder loans and other non-standard financing forms shall not exceed 1 times their net assets; The balance of funds deposited through the issuance of bonds, asset securitization products and other standardized forms of debt assets shall not exceed 4 times its net assets. In a single joint loan, the proportion of capital contribution of a small loan company operating online small loan business shall not be less than 30%.

This puts Ali facing huge financial pressure.

“China Fund News” reported that on the basis of 1.8 trillion joint loans, Ant Group’s corresponding on-balance sheet loan balance is at least 540 billion yuan, much higher than the current 36.2 billion yuan on-balance sheet loan balance. According to the principle of up to 5 times the leverage of small loan companies’ on-balance sheet loans, and including other current on-balance sheet assets, Ant’s small loan companies’ capital needs to be expanded to 140 billion yuan, which is much higher than the current Huabei and Bibai companies. The total registered capital is 35.8 billion yuan.

Ant’s joint loan requires supplementary funds. The source of funds can be ABS, or shareholders’ capital increase or the introduction of strategic investment.

Ant’s funds collapsed.

Immediately, Ali ABS interest rates rose immediately.

Ants may think that they are just an intermediary agency, but the parties do not recognize it. Some people believe that ants are essentially highly leveraged finance. If they continue to develop in this way, they will become a poisonous ant. In the end, risk spreads until it becomes uncontrollable. Excessive use of leverage will make ants become a financial perpetual motion machine.

On December 8, 2020, Mr. Guo Shuqing delivered a speech at the Singapore Fintech Festival.

Guo Shuqing affirmed the rapid progress of financial technology, but mainly pointed out that the financial technology industry has the characteristics of “winner takes all”. Large technology companies often use data monopoly advantages to hinder fair competition and obtain excess returns. Traditional antitrust laws cannot rule these companies. .

These new types of “big to fail” are risky. They dominate the payment market, master data, and have the characteristics of infrastructure. These infrastructures involve public interest and should belong to the government.

It seems that the time has come to fulfill the handover promise. Soon, the infrastructure and basic data will be handed in, and capital must be added.

Ants fold their feet and may trip over elephants.

Mr. Guo Shuqing deserves our focus.

Sudden change! Pfizer’s new crown vaccine has another big news!

On Thursday, U.S. time, the three major U.S. stock indexes were mixed. The Dow rose 0.29%, the S&P 500 closed down 0.06%, and the Nasdaq closed 0.23% higher, setting a record intraday and closing record high. A series of U.S. economic data released recently has attracted widespread attention.

U.S. service sector growth slows in November, number of jobless claims drops

According to data from the American Institute of Supply Management, the service industry purchasing managers index in the United States in November was 55.9, which fell to the lowest level in the past six months, which means that the expansion of the US service industry has become more moderate. Another data shows that the number of people applying for unemployment benefits for the first time in the United States last week was 712,000, which was far lower than the 775,000 estimated by the Reuters survey and a significant drop from the previous value.

However, government regulators have previously stated that because the US Department of Labor uses a traditional estimation model, the statistical results may not accurately reflect the impact of the second wave of COVID-19 on the job market.
Pfizer cuts 2020 new crown vaccine production target by half, U.S. stocks dive late

About half an hour before the US stock market closed, local media reported that Pfizer, the US drugmaker, had cut its 2020 new crown vaccine production target by half, and Pfizer’s stock price closed down 1.74% following the news. This news also caused the three major U.S. stock indexes to collectively dive in the late trading, almost erasing all the gains during the session.

Mining stocks boost the London stock market

The three major European stock markets were mixed on Thursday. The London stock market rose 0.42% to close at a new high in the past six months. The Paris and Frankfurt stock markets closed down 0.15% and 0.45% respectively. In the London stock market in the United Kingdom, mining stocks led the way. In addition, British aero engine manufacturer Rolls-Royce’s stock price soared nearly 16% after reports that the company is considering re-entering the narrow-body airliner market.

Data show: Eurozone business activity shrank sharply in November

The other two major European stock markets performed in a downturn, as the latest data showed that the Eurozone’s comprehensive purchasing managers’ index fell to 45.3 in November from the previous value of 50, indicating a significant contraction in business activity in the Eurozone. In addition, the trade negotiations between the UK and the EU have not made progress, which has also suppressed market sentiment.

OPEC+ agrees to slightly increase production starting from January next year, crude oil prices turn from falling to rising

Crude oil prices closed up on Thursday. US WTI light crude oil futures closed at US$45.64 per barrel, and Brent crude oil futures closed at US$48.71 per barrel, reaching the highest level since early March. A key meeting of OPEC and related oil-producing countries was held on Thursday. The major oil-producing countries finally agreed to increase oil production by 500,000 barrels per day starting from January next year, which is much lower than the market’s forecast of an increase of 200 per day. 10,000 barrels, the price of crude oil followed the news from falling to rising intraday.

The United States may launch a financial rescue plan expected to help raise the price of gold

The price of gold rose on Thursday, and gold futures for delivery in February 2021 closed at $1841.10 per ounce. Investors bet that the negotiations on the US financial rescue plan will have a breakthrough and deploy gold to hedge against potential inflation.

Talking about the market

International events
Surging news: get rid of “menstrual poverty”! Scotland has become the first region in the world to provide free menstrual supplies.
China News Network: Pakistan prime minister approved draft legislation on chemical castration of rapists.
World Wide Web: trump announced a pardon for former national security adviser Michael Flynn.
Observer: UK GDP is expected to shrink by 11.3% this year, the biggest contraction in 300 years.
Global network: Ethiopia’s prime minister said that 72 hours after the ultimatum, the army had been ordered to march into Tigre state capital.
Talking about the market
Yesterday, the U.S. market was closed… The day before yesterday, a wave of killing was not enough. Yesterday, another wave was killed in the day.
Look at the end of the day before yesterday that look for life and death of children, yesterday morning, the second kill fall is not unexpected.
But what happened? It also provides an excellent opportunity for foreign investors to copy the bottom.
Yesterday’s such a good opportunity, people are really rude. They have been flowing in all day and accelerating again in the end of the day. By the end of the day, the net inflow was as high as 8.1 billion, which was a match with the tens of billions on Monday.
It has to be said that domestic funds are still wasted, which can not be compared with overseas funds.
At the end of the year, the central bank should be able to raise the stock market by a large margin.
Even the Asia Pacific stock market is against you, including Hong Kong stocks, which are close to each other. At the end of the year, it is the time for major funds to rush performance. Looking at the recent plate performance, traditional industries are obviously stronger, such as wine making, finance and several major cycle sectors. New energy vehicles are one of the few emerging industries that contribute to performance. This shows that funds tend to be conservative in order to maintain their rankings near the end of the year.
Ali joined hands with SAIC to build a car
In November 26th, SAIC and the government of Pudong New Area signed a strategic cooperation agreement at the Shanghai center. SAIC’s high-end smart electric vehicle project was officially named “Chi Chi car” and settled in Pudong. At present, Zhiji automobile has completed the initial round financing of more than 10 billion yuan, which is jointly built by SAIC Group, Pudong New Area and Alibaba group.
Under the market orientation, only two types of new energy vehicles have real competitiveness, that is, low-end vehicles compete with cost and high-end vehicles compete with intelligence.
Obviously, in order to develop new energy vehicles, high-end models full of intelligent technology are indispensable puzzles; coincidentally, high-end brands are just the fields that almost all Chinese automobile enterprises have been pursuing, but have not been able to. In recent ten years, the two major strategies of China’s automobile industry, electrification and high-end, have been deeply overlapped, and high-end intelligent electric vehicles are imperative.
So many car makers need batteries? Obviously, Ningde and BYD have big opportunities.
Important information of individual stocks
Baoxin Technology: Jiangsu jiedeng will become the controlling shareholder of the company by transferring 5% of the company’s shares at a premium
Qin’an Co., Ltd.: the hybrid products developed by the subsidiary are in the early stage of research and development, and there are no mature and applicable products at present