Shanghai Broadens QDLE Program to Include Domestic Mutual Funds

Jul 10 2015 | 10:13am ET

Shanghai has expanded its qualified domestic limited partner program (QDLP) to include domestic mutual fund firms.

The move is aimed at diversifying licensed holders and cementing Shanghai’s position as a global financial center, according to an article in Asian Investor.

The first fund company to be included in the program, China International Fund Management, is a joint venture between JP Morgan Asset Management and Shanghai International Trust and Investment. It has received a quota of $100 billion. 

The QDLP program was conceived as a way to allow licensed investment managers to raise assets denominated in RNB to invest overseas. Now that other regulations governing cross border investments have been implemented, expansion of the QDLP program gives companies like China International Fund Management (CIFM) a more comprehensive method to further expand its business by including domestic mutual fund assets in overseas alternative investments.

At this point, only the JPAM/CIFM joint venture has applied for the new designation, highlighting the difficulties domestic mutual fund firms have in teaming with an overseas shareholder that brings broad alternative asset capabilities.

In CIFM’s case, the company has developed an internal team that will study hedge funds, and plans to initially invest via feeders and/or hedge fund-of-funds. The firm is readying its first QDLP offering, which will invest in an overseas hedge fund with global multi-asset capabilities, according to the article. 

The move comes amid staggering volatility on Chinese stock exchanges over the past few weeks, attributed at least partly to the recent involvement of large numbers of Chinese retail investors with little financial acumen. 

The Shanghai QDLP program dates from 2013, when six global hedge fund managers were approved. It expanded by an additional five overseas money managers concentrating on real estate and private equity earlier this year. 

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