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US investment manager Neuberger Berman eyes more mutual funds in China after raising US$595 million for its first product

South China Morning Post 26/03/2023 Iris Ouyang

Neuberger Berman aims to launch another equity-focused fund this year after the success of its first product in China
The New York-based company wants to build its China unit into a boutique investment manager, top mainland executive Peter Ru says

Neuberger Berman is keen to launch more mutual funds in China after raising 4.09 billion yuan (US$595.6 million) from retail investors for its first product, as the US asset manager joins other global firms in targeting the nation's US$3.7 trillion mutual-fund market.

The New York-based company will launch another equity-focused fund in China targeting onshore shares later this year, most likely in the second or third quarter, a senior company executive said, adding that the firm was simultaneously strengthening its investment and research capabilities in the country.

"We are trying to build our mainland unit into a boutique [investment manager] and [initially] launch only a few products to nurture clients," Peter Ru, the Shanghai-based managing director and China fixed-income strategy leader at Neuberger Berman, told the South China Morning Post in a recent interview.

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The firm's focus on China comes as peers like BlackRock, Fidelity and Alliance Bernstein have won approvals for setting up wholly owned mutual-fund entities in the industry's third-largest market after the United States and Europe.

Peter Ru, managing director and China fixed-income strategy leader at Neuberger Berman. Photo: Handout

International fund managers have been vying for China's fast growing mutual-fund market, which has grown at a compound annual growth rate of about 20 per cent over the past five years, according to Fitch Ratings.

Neuberger's maiden product was the second retail fund launched by a wholly owned foreign investment firm in mainland China, after BlackRock in 2021. Neuberger was the second international asset manager to get a mutual fund licence in China, which it received in November.

Chinese investors subscribed to units worth 4.09 billion yuan in Neuberger's retail bond fund, with 80 per cent allocation for fixed income and 20 per cent for onshore equities.

Such funds have become popular with risk-sensitive retail investors in recent years. Neuberger said the amount raised by its maiden product in China was the year's biggest to date, among the same type of bond-focused funds with mixed investments into equities, citing data from Wind Information.

Fidelity among latest foreign entrants in China's US$3.7 trillion mutual-fund market

Neuberger chose a bond-focused fund for its China debut in the hope of generating decent returns that would attract more investors in the world's second-largest economy, Ru said.

Ru and Zhou Ping, head of quantitative investment at the unit, will co-manage the firm's maiden fund.

Wei Xiaoxue, a veteran fund manager with nearly 20 years' experience in China, is expected to manage the next equity fund. Wei joined Neuberger's mainland unit earlier this month as general manager of its equity department and head of research.

Neuberger's team predicted at the end of last year that China's economic recovery was likely to be gradual given domestic and external uncertainties.

China looks to private firms and foreign investment to fuel growth

"We foresee that the foundation of China's economic recovery is not [going to be] that solid amid various uncertainties," Ru said, referring to the fragile state of the property market as well as external risks ranging from the US Federal Reserve's interest rate increases and geopolitical tensions.

"This year's economic recovery will be gradual, it won't be rapid," Ru said.

In the short- to medium-term, the Wall Street asset manager aims to launch products with specific themes such as environmental, social and governance, and other promising investment trends in China that align with policy directions - including high-end manufacturing, digital economy, new energy and healthcare, the company said.

In the long term, Neuberger has set its goals on getting more licences in other financial segments and gaining a bigger market share on the mainland.