UBS sets up $100m investment unit in Shanghai

UBS AG's wealth management department in Beijing.[Photo / China Daily]

UBS Asset Management, the investment arm of Swiss investment bank UBS Group AG, has established a fully owned foreign entity in the Shanghai free trade zone to raise onshore private funds.

With an initial quota of $100 million, the entity will be officially launched by the end of this year under the Qualified Domestic Limited Partner scheme, the firm said. It is hoping to tap into the growing demand for asset investments from Chinese investors in overseas markets amid the volatile domestic stock market and the fluctuating value of the yuan.

The entity will invest mainly in hedge funds in the United States and European markets and pursue a strategy that focuses on stable investment returns, Ling Xinyuan, China chairman of UBS Asset Management, said in Beijing on Thursday.

UBS managed to deliver positive investment returns for its clients even when the global markets saw sharp volatilities in August, Ling said, adding that the average investment return of UBS' hedged fund has been about 8 to 9 percent over the past three years.

UBS joined a slew of foreign hedge funds and asset managers including Man Group Plc, Citadel LLC, Oaktree Capital Group LLC, and BlackRock Inc, which have gained the QDLP licenses.

So far, at least 14 foreign institutions have obtained the licenses to raise private funds in the Chinese mainland under the scheme.

Established in 2012, the QDLP scheme is designed to allow qualified foreign asset managers to raise private funds from Chinese institutional investors and affluent high-networth individuals to invest in overseas assets.

The program marked a step forward by the government to liberalize China's capital market. Some analysts have pointed out that the declining interest rates and cooling property market have resulted in a shortage of attractive assets in China, which has sparked growing appetite of Chinese investors for overseas assets.

The Asia-Pacific region (excluding Japan) is expected to be the world's richest region in 2016, surpassing North America which recorded $51 trillion in private wealth last year, according to the Boston Consulting Group.