Both firms are now waiting for the State Administration for Foreign Exchange to give them the actual quota sizes, which they expect in six-to-eight weeks, at which point they can provide more details about product development.
Ajay Srinivasan, managing director at Prudential Asset Management in Hong Kong, says the quota size will shape the nature of the product Pru can create for international investors.
Tony Archer, managing director at Morgan Stanley Investment Management, says the firm intends to offer something innovative with its quota. Giving international investors direct China exposure is part of the firmÆs $15 billion global emerging markets business for institutional clients, he adds.
They join a handful of other fund managers with their own QFII licenses. This spring, Goldman Sachs Asset Management offered an A-share fund to institutional investors using its $200 million QFII quota, while JF Asset Management offered a retail product to Hong Kongers with its $150 million quota.
Prudential has a joint venture in China with Citic, initially a life insurance JV between Prudential Asia Corporation and Citic that recently expanded into a mutual funds JV. Citic Prudential Fund Management launched its first product in March, a balanced fund. Prudential Asset Management has not offered A-share products to international investors before.
Morgan Stanley Investment Management does not have a domestic JV or an on-the-ground presence in China, but it has managed A-share products out of Singapore for international investors, accessing the market through third-party brokers with QFII licenses (including Morgan Stanley itself).
Fund managers seek their own QFII licenses because they donÆt have to compete for a share of a third partyÆs quota, and because it removes a layer of fees to end investors.