First China onshore fund of funds launched by UBS Asset Management

UBS Asset Management has announced that its Shanghai division has launched its first onshore fund of funds. This makes UBS the first foreign asset manager to launch a fund of private securities funds (FOF) in China.

The firm hopes that the FOF will meet the growing demand for high-quality, actively managed fund products in line with the new asset management regulations which induced a shift from guaranteed-return to net asset value products, as described in a press release.

The launch of the onshore FOF should give Chinese investors access to a platform with the potential to improve investment returns, whilst also defusing systemic risk. This means that investors may no longer have to face the historical landscape of a large investable universe and high dispersion of returns, which has been challenging for endinvestors.

“The investment strategy” as described by Xia Kun, the fund manager appointed by UBS Shanghai, “aims to achieve long-term capital appreciation while maintaining both moderate beta to the China A-share market and moderate volatility over an economic cycle.”

Xia also expressed his team’s dedication to risk-minimisation: “our investment team continually evaluates operational risks and investment structuring. Hedge funds are highly dynamic and there is extraordinary value in the exit decision.”

Although Xia acknowledged the lack of operational risk awareness in China, and the need for time in order for the industry to align itself to the global standards of investor protection, the rapid development of private securities fund industry in China sets the stage for UBS’ FOF to “realize the full potential of the FOF product model in China,” as described by Raymond Yin, Head of Asia Pacific and Head of China onshore.