JP Morgan Asset Management is one of the few firms to have raised significant assets under Hong Kong and mainland China’s mutual recognition of funds (MRF) scheme. Miranda Mou, head of China intermediary business, explains why.
What are the main challenges with the MRF scheme?A consistent challenge for MRF since the beginning of the scheme has been limited choices of northbound funds, which has constrained penetration potential for the programme. But although the speed of the MRF approvals process has at times been slow, we continue to believe there is significant potential for growth, considering the limited choice of overseas investments available to China investors.
How important are distributors in a successful MRF strategy?Successful partnership with distributors is instrumental to success in the MRF scheme. Our collaboration with our local representative, China International Fund Management (CIFM), has been supportive in helping us to advance domestic investor education. Although investment choices for mainland investors in the MRF scheme are still limited, JP Morgan Asset Management offers pan-Asia equity and bond funds that provide diversification and a degree of risk management for investors otherwise heavily allocated to domestic investments.
How do you assess the success of fundraising for the Asia Total Return Bond Fund?As one of the first funds to be approved for northbound distribution in December 2015, the fund enjoyed a first-mover advantage. Secondly, JP Morgan Asset Management has worked closely with our CIFM partner to establish the groundwork and joint strategy for our participation in MRF, enabling us to build brand awareness with investors and make significant progress with investor education.
The strength of our distribution channel relationships have been instrumental in supporting the fund, but it is also a function of investor preferences as many mainland investors are seeking greater fixed income diversification. With the backdrop of a low interest rate environment globally, the fund has proven popular with investors looking for a lower-volatility investment vehicle that helps to generate income.
Your firm has two more pending applications under MRF. What are they?The JP Morgan Asia Equity Dividend Fund seeks to provide both capital appreciation and income generation in Asia (excluding Japan) equities. The JP Morgan Global Bond Fund provides broader geographic exposure than our existing JP Morgan Asian Total Return Bond Fund and mainly invests in higher-quality bonds.
The products meet the needs of investors for growth or income strategies and varying risk tolerances. These solutions enable investors to build a balanced portfolio and rebalance regularly according to risk tolerance and market environment.
What is the future of MRF? We expect further expansion of the MRF scheme as China’s market liberalisation continues. We are excited to see more participants in the market and more products available to mainland investors.
Cross-border mobility for mutual fund investing for China and Hong Kong investors has the potential to significantly enhance portfolios.
We believe that over time, this market will continue to take shape and that the key components to success – brand building, effective mainland distribution partners and relentless commitment to investor education – will differentiate the leading players.
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