Reform to help funds play big

Blue Stone AMC head says favorable policy can make financing easier for private firms

Incentives through policy, and licenses for private funds, can better support China's financial market and real economy now as the country is already expanding both domestic and overseas investment channels for Chinese companies, the top executive of a major private fund said.

Any new measures as part of China's reform and opening-up policy would help strengthen the financial sector as well, said Duo Yuan, founder and chairman of Blue Stone Asset Management, one of the country's largest private funds by assets under management, or AUM.

Duo said he sees further scope for wider access for private businesses to mutual fund activities. Such access would help them to graduate to full-fledged, market-oriented specialists.

"This will make financing for China's private companies easier and the connections between financial institutions and the real economy stronger," he said.

Just 41, Duo is already regarded as a veteran of China's financial sector. He first founded the BOC International's fixed income business, and then went on to set up the fixed income business at China International Capital Corp, a major Chinese investment bank.

As chairman, he oversees Blue Stone's business covering, among others, bond investments and sales, trust investment plans, commodity futures and hedge funds.

Its AUM were above 20 billion yuan ($2.9 billion) as at the end of November. The firm has cumulatively invested up to 300 billion yuan in the form of direct finance extended to private enterprises.

"Private funds investing chiefly in credit and debt instruments have a more immediate and productive role in supporting the real economy, by making direct finance available and more affordable for companies, especially privately owned enterprises," he said.

To extend the reform and opening-up policy to the financial sector, China has decided to allow a more flexible flow of stocks and bonds between markets.

The country now lets non-Chinese financial institutions to set up wholly owned units in the country.

"In the short term, there could be uncertainties in the country's financial markets and economy, but many moves by the People's Bank of China to adjust related policies, are expected to promote the country's credit conditions in 2019," Duo said.

"China can adopt effective international practices while charting a path that befits its unique characteristics."

The segment of private investment funds is still nascent in China. Nonetheless, in terms of AUM, it has grown aggressively, to be on a par with mutual funds, said Duo.

According to data from the Asset Management Association of China, the combined AUM of Chinese private funds were 12.79 trillion yuan by the end of November, almost on a par with mutual funds, which had about 13.61 trillion yuan in combined AUM.

Duo said: "There were 36,053 private funds focused on securities investment, with their collective AUM totaling 2.26 trillion yuan in China. I was fortunate to have boarded this fast train of private fund boom.

"As a fund manager with over 15 years of experience, I can feel the tremendous potential of this industry."

The gap between Chinese private funds and their counterparts in developed markets, he said, is yet to be bridged. Chinese firms hope that reforms will bring about industry renewal and ultimately lead to robust growth of China's capital market.

Even as the global financial industry comes to grips with fintech, China has already taken a leading role in the field, especially in mobile payments, he said.

Technology will make finance more accessible, and the opportunity for companies and countries to connect in this sector has notably grown.

Duo said he hopes financial innovation will flourish with support from both the authorities concerned and people at large. A policy environment that can provide sustainability and stability would benefit the financial sector.

Agreed Wang Jun, an academic committee member of Beijing-based China Center for International Economic Exchanges. Wang stressed that as an important pillar of the economy, the financial sector has seen a proliferation of innovation and investment platforms, along with new investment opportunities.

"It has not only helped China's capital market to flourish but offered more choices. It has allowed investors to invest in the capital market and share in its growth dividends. In particular, the adoption of innovative technologies such as fintech, big data, artificial intelligence and blockchain has greatly stimulated business transformation in the financial industry," he said.

Educated at Fudan University and Tsinghua University, Duo enjoys outdoor activities, wine tasting, reading history and financial books during his spare time.