UBS Asset Management plans to expand in China, having secured its private-funds license earlier this month.
The firm has about 20 staff in China and plans to increase that to more than 30 people on the ground by the end of the year, according to Rene Buehlmann, head of Asia Pacific at the asset manager.
“We are hiring around portfolio managers, analysts, distribution people and we will further enhance as we go along when clients come on board,” said Buehlmann, who has made monthly visits to China.
The hiring is part of a broader plan by UBS to double staff in China over five years, as outlined by CEO Sergio Ermotti in 2016, according to Buehlmann. The group plans to add about 600 people across wealth management, investment banking and asset management, Ermotti said last January.
The license allows UBS to start managing money for mainland institutional and high-net-worth investors in the world’s second-largest economy for the first time. The stakes are high as foreign funds race to gain a foothold in China’s burgeoning fund management industry. Assets under management for the nation’s private fund industry grew 54.6% in 2016 to $398 billion, according to Z-Ben Advisors.
Fidelity in May became the first global asset manager to start a private fund in China, while BlackRock said this month it is preparing to start a private fund in China.
UBS plans to launch onshore products as soon as it can, said Buehlmann, without giving a specific date. “We will launch an equity product and a fixed-income product and then certainly, we will look at multi-asset,” he said.
While the private fund license gives UBS the opportunity to sell products to onshore investors, it’s also a “super-competitive market,” said Buehlmann, citing the number of fund managers in China including joint ventures with foreign funds.
UBS will be targeting multinational companies that have subsidiaries with cash in China as such firms prefer to invest their money with global firms which have a “cautious risk management approach,” said Buehlmann.
The Swiss asset manager also wants to lure foreign investors into China, given the low foreign participation in China’s bond and stock markets. China accounted for 15% of global gross domestic product in 2015 but in global bond indexes for U.S. currency bonds, China’s share was 0.5% as of May 31, according to UBS.
China’s onshore bond market offers opportunities for yield-hungry investors across the globe, including sovereign wealth funds and pension funds, according to Buehlmann.
“If you think just about the China government bond market and how big that is, you actually have real yield,” said Buehlmann. “I’m [incredibly bullish] on this one, I really think there will be a lot of demand.”