Most Read Contributor in British Virgin Islands, February 2017
Private Equity Funds and Fund of Funds in China, also known
as 'Sunshine Funds', are growing rapidly. In this guest
post, my colleague and Managing Partner of
Kristy Calvert explores the reasons behind this trend.
The Asset Management Industry is one of the fastest growing
business sectors in China. Privately managed (non-retail) funds in
China, often referred to as 'sunshine funds' by local
practitioners, have traditionally enjoyed a largely unregulated
environment – unlike the mutual funds industry, which is
heavily regulated by the Chinese Securities Regulatory Commission
The Asset Management Association of China (AMAC) was established
on 6 June 2012 as a self-regulated organization. AMAC is staffed by
former employees of CSRC and aim to promote a better regulated
wealth management sector in China.
AMAC has a voluntary registration mechanism on its website in
China. Given the voluntary nature and relative ease of registration
on the AMAC site, more and more onshore private fund managers have
used the association as a tool to promote their fund publicly and
add to their credibility. Since AMAC's inception date, I have
taken a keen interest in the registration database and been a
regular site visitor. I have often been taken by surprise by the
amount of managers being added daily from what was a virtually
non-existent database in 2012.
AMAC reports that by the end of January 2016, there were 25,841
registered private fund managers and 25,461 registered private
funds; and subscription scale reached approximately US$826 billion
while contribution scale amounted to approximately US$663
Source: AMAC. Divided by total subscription scale of running
funds, there're 292 funds between 2 billion to 5 billion yuan,
114 funds between 5 billion to 10 billion yuan and 88 funds over 10
As the private funds industry in China is starting to mature, we
are also seeing more Fund of Funds ("FOF") emerging in
the market. Chinese securities companies are the pioneers leading
this new development in China. It has been reported that CITIC
Securities, the largest securities company in China, has already
invested RMB 1.5 billion in about 60 private funds since 2010,
alongside other key players in the market such as China Merchant
The growth of this local asset management industry has coincided
with the growth of high net worth individuals in China.
In recent years, due to the application of various investment
controls by the Chinese government to cool down the local property
market, many wealthy Chinese have turned to alternative
investments. Private fund managers commonly access their investor
pool through private bankers and wealth managers in China, as well
as using family and friend networks.
Local fund associations have also been formed in recent years,
with support from local district governments. These provide
educational and support forums for these private managers to
interact with each other and professional service providers in the
industry to better structure both onshore and offshore funds. Many
private fund managers have run very successful local funds with
impressive returns year on year to their Chinese investors.
Given the existing success achieved by the local teams, we are
seeing a trend of more and more of these managers establishing US
dollar funds offshore – often domiciled in the Cayman
Islands. Over the past four years, while living in Shanghai and
working with these fund managers, I have helped some of these
well-known local brands to launch their first-ever offshore funds.
These offshore funds have leveraged off their existing reputation,
performance, and investor base while becoming more international
and establishing more robust track records, as well as providing
diversification and growth for their investors' non-China
We are excited to be part of this growing and innovative
industry in China as it matures and seeks to showcase its
investment talents on the international stage.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Over the last 40 years, the Cayman Islands has matured into one of the world's most sophisticated and successful international financial centres, providing a competitive, effective, transparent, cost-efficient and tax-neutral platform for international capital flows underpinned by an environment of legal, political and economic stability.
In the context of the Private Member's Motion, Cayman Finance strongly urges the movers of the motion and the other members of the House to remain focused on the need to protect the Cayman Islands Financial Services Industry, which is directly responsible for more than half of the Islands' economy, more than half of the government's revenue and employs more Caymanians than any other industry.
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