BlackRock MF may set trend, grow sector

BlackRock, a global asset manager, launched on Monday China's first mutual fund, or MF, run by a wholly foreign-owned firm.

Market insiders said this can be taken as a sign that China's financial opening-up and future potential of the local mutual fund market are encouraging foreign asset managers to reinforce their commitment to the country.

BlackRock Fund Management Co Ltd, BlackRock's wholly owned mutual fund business in China, offered its first product on Monday, aiming to raise between 200 million yuan ($30.9 million) and 8 billion yuan.

The BlackRock China New Horizon Mixed Securities Investment Fund has attracted subscriptions of more than 3 billion yuan on Monday, financial news outlet Cailian Press reported.

Distribution channels also told China Daily the offering will continue as the money raised on Monday did not hit the 8 billion yuan cap.

"As the first mutual fund run by a wholly foreign-owned manager, the fund's offering has marked a milestone for China's mutual fund industry," said Dong Dengxin, director of the Wuhan University of Science and Technology's Finance and Securities Institute.

Taking a long-term investing approach, the fund will mainly invest in the Chinese mainland and Hong Kong-listed stocks, bonds, and derivatives. It will focus on five growth sectors in China, namely new energy, mass consumption, digital transformation, retirement and industrial innovation and upgrade.

The fund launch reflects the trend of global players entering the Chinese MF market at a fast clip, attracted by the market's future potential and China's financial opening-up efforts, especially the removal of foreign ownership caps in the sector last year, experts said.

In June, BlackRock received approval to start a wholly owned onshore mutual fund business, while Fidelity International received approval in August. A string of other global managers, including Neuberger Berman, AllianceBernstein, VanEck and Schroders, have also applied to set up a wholly owned mutual fund business each in China.

China's MF market, currently the world's fourth-largest with assets worth 23.5 trillion yuan under management by the end of July, is expected to keep up a double-digit growth in the next few years.

For instance, a McKinsey & Co report said in January that the value of China's MF market is forecast to expand at an annualized rate of 18 percent on average from 2019 to 2025, thanks to the booming demand for wealth management from retail investors, the development of personal retirement products, and the capital market reform and opening-up efforts.

Dong said the introduction of wholly foreign-owned managers into China's MF market will usher in different investment strategies and mindset, with a particular strength in overseas asset allocation and investment advisory.

"Their rising presence will boost competition and give rise to more consolidations in the industry," Dong said.

He said foreign players' MFs with considerable exposure to global markets are expected to be more appealing to investors in China than those with focus on domestic market investments.

Tony Tang, BlackRock's head of China unit and BlackRock Fund Management's chairman, said, "The continuous opening-up of China's financial markets presents compelling opportunities for BlackRock."

The company is well-positioned to introduce a series of MF products and help more Chinese investors improve financial well-being through its global investment platform, local market insights, and risk management expertise, Tang said.