Chinese fund manager Harvest Global Investments is out to prove it can compete big time against well-established UK-based players in the global asset management arena. The question is, can they do it?

 

The Hong Kong subsidiary of China’s second largest asset management company by asset, Harvest Fund Management, will set up a fund management company in London, announced Chancellor of the Exchequer George Osborne at the UK-China economic and financial dialogue.

 

Harvest’s application - which is subject to Financial Conduct Authority’s (FCA) approval - represents the first Chinese-parent fund company to choose London as a base outside of China and Hong Kong.

 

“Having successfully established our first offshore presence in Hong Kong since 2009, Harvest is continuing our global expansion. We see significant growth opportunities in Europe and London’s importance as a global financial center is where we want to be,” says Harvest CEO Peng Choy.

 

Harvest Global Investments has a significant book of business from European clients. “We are confident that there is demand from Europe,” Jeff Lim, head of the Hong Kong subsidiary’s product and client service, tells The Asset in an interview. “London to us is an ideal gateway to Europe. With people on the ground, Harvest can better serve its existing clients, while at the same time grow its European book of business,” he adds.

 

The London office will be a fully-functional asset management company that will initially focus on offering European investors access to China’s market through Harvest’s investment expertise. Gradually, it will expand to include China-focused Asian strategies and eventually build a Harvest- branded UCITS platform, according to Lim. Harvest launched the db x-trackers CSI300 Index UCITS ETF in 2012 with Deutsche Asset & Wealth Management.

 

“As a start, our focus [of the London branch] will be on institutional investors. Gradually, we plan to offer our investment expertise through appropriate retail platforms,” Lim shares. The London office is now in the final stage of preparations and we hope to establish the office in early 2015, he shares.

 

“We plan to have an initial staff strength of up to 10 in London across different functions – fund managers and operations inclusive,” Lim continues. “We’ll ensure that the critical roles are in place before the FCA authorization while the other positions will be phased over the first six months.” Harvest will engage recruitment consultants who will be mainly local hires in the UK, with potential transfers from its Hong Kong and China offices.

 

Commenting on the upcoming launch of the Shanghai-Hong Kong stock connect programme, Lim says this is a positive development for them as this is making international investors rethink about exposure and  access to China. “With the rapid internationalization of the Chinese domestic markets through initiatives such as Shanghai-Hong Kong stock connect and RQFII,  international demand for investment expertise will also increase. We look forward to these opportunities” he adds.

 

The UK has further secured its position as the second global hub for offshore renminbi this year. Around 60% of all trades conducted in renminbi that take place outside of Greater China are made in London, according to data from the British Consulate General Hong Kong. In addition, the Standard Chartered Renminbi Growth Index shows that London’s share of the total global renminbi offshore market stands at 15% (up from 9% in 2012).

 

In June this year, Chinese Premier Li Keqiang and Osborne made several announcements during the UK-China Financial Forum in London. These include the appointment of China Construction Bank as London’s renminbi clearing bank, the first outside Asia; the direct trading between the pound and the renminbi; the granting of UK RQFII licenses to HSBC Global and BlackRock and the approval for renminbi-denominated loan guarantees by the government’s export credit agency, UK Export Finance.