Asset managers set sights on Chinese cash

Updated: 2016-10-26 16:53

By CECILY LIU(China Daily UK)

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London's asset managers are competing for an expected growth in Chinese capital flowing into the UK through the tier 1 investor visa scheme.

The scheme, through which foreigners park at least 2 million pounds in capital in the UK to qualify for British permanent residence status, is expected to be more popular with Chinese people after Brexit uncertainties have led to a depreciation in the pound in recent months.

From boutique asset managers, such as Cerno Capital, to family offices such as Oracle Capital, right up to international banks, such as UBS, asset managers are devising strategies to target Chinese customers.

They are creating portfolios of investment targeting UK bonds and stocks that specifically satisfy the requirements of the tier 1 visa, as set out by the British government.

These portfolios are different from global portfolios created for their traditional British client base, whose investments are not limited to the UK.

Cerno Capital, which has a flagship global portfolio achieving a 6.9-percent annualized return, has created several new portfolios in lower risk UK assets targeting tier 1 visa applicants, generating up to a 3.2 percent return.

Such a return is still better for many Chinese clients, who otherwise might have put their money into the safest option, government bonds, Cerno argues. UK gilts, as they are known, currently yield 1.12 percent.

Others champion relationship management to try to win over clients. An example is the London-based multifamily office Oracle Capital,which has seen a growth of tier 1 investor visa applicants from China during the past four years.

Anton Davidenko, head of client relationship at Oracle, said his team offers a "one-stop shop" approach, which includes helping with the visa application process.

According to the latest UK government data, China had the highest approval rate for tier 1 investor visa applications during the second quarter of 2016, accounting for 20 out of 43 such visas granted.

Brian Pallas, founder of Opportunity Network, which matches Chinese firms with potential UK acquisition targets, said he has seen more tier 1 investor visa applications by Chinese family business owners since the referendum vote.

"Uncertainties about the UK-EU negotiation leads to the worry that some European employees in the future may no longer be able to work in the UK, and therefore Chinese companies that have a subsidiary in the UK are starting to consider sending a member of their family to the UK for management, and now they are starting to apply for tier 1 investor visas," Pallas said.

To qualify for the visa, investors need to either invest 2 million pounds, 5million pounds or 10 million pounds. The mandatory duration of investment changes according to the amount invested. Meanwhile, some critics are warning that asset managers must point out potential risks.

David Chang, secretary-general of the China Family Office Association, said many Chinese investors lost money with Western asset managers and are wary of those claiming to generate higher returns.

Chang said Chinese investors already feel like they are getting a bargain because of the depreciated value of the pound.