As the 2nd largest economy in the world and fastest growing, China’s market is attracting strong demand from foreign investors. The inclusion of China in MSCI and government scrapping quota restrictions on inbound investment schemes QFII and RQFII further stimulates the demands for inbound investment. China’s inefficient market brings tremendous alpha opportunities for sophisticated overseas investment managers. The demands from Chinese investors for global asset allocations have been increasing due to the need for diversifying risks from declining returns on domestic assets and weakening RMB.
However, there are many obstacles and challenges in the cross-border investment: high operational cost of WFOE, conflict of culture and investment philosophy in JV, unfamiliarity with the local financial market etc., all impose major risks for the foreign manager to invest directly in Chinese markets; domestic investors are still hesitant about investing the overseas products due to their complexity and lower yields.
At Sycamore, we provide innovative solutions for cross-border investment by enabling foreign investors to access the best fund managers in China and addressing the challenges of the product setup hurdle.