Fidelity plans to enter the mainland via trust venture

SHANGHAI - Mutual fund giant Fidelity is actively preparing to enter the Chinese mainland by securing a trust company license in one of the world's fastest-growing asset management markets, a person familiar with the situation said on Wednesday.

Fidelity, which a few years ago dropped its venture talks with China's Hua An Fund Management Co, is now seeking to invest in a Chinese trust company, which will enable it to launch products on the mainland, said the source, who declined to be identified because he was not allowed to speak to the media.

A spokeswoman at Fidelity International declined to comment.

"Many foreign and domestic investors are seeking a trust company license, which will enable them to conduct a wide range of finance-related businesses," said Wei Tao, Beijing-based analyst at China Securities Co.

Subject to less regulatory scrutiny than banks or mutual fund houses, Chinese trust companies are allowed to launch a range of products to invest in stocks, bonds, infrastructure and real estate projects. Some overseas banks including Morgan Stanley and Macquarie Group Ltd have already set up Chinese trust joint ventures, in which a single foreign institution can hold up to a 20 percent stake.

The sector is attracting a new wave of foreign investor interest. The Financial Times reported on Wednesday that JPMorgan Chase & Co, in addition to Fidelity, was preparing to apply for a Chinese license.

Fidelity is hoping that by investing in a Chinese trust company, it can launch products under China's Qualified Domestic Institutional Investor scheme, which channels money into overseas capital markets.

Fidelity's star manager Anthony Bolton is well known in China. He frequently makes speeches at financial conferences on the mainland, and books promoting his investment philosophy are popular at Chinese bookstores.

Last week, Bolton's Fidelity China Special Situation Fund wrapped up a share offering, raising its targeted proceeds of 166 million pounds ($269 million), more than a third of which came from new investors.

The fund has risen about 8 percent in net asset value since its launch in April 2010.

Reuters

(China Daily 02/25/2011 page17)