JPMorgan's China JV eyes $1-$2 billion fund

By Charlie Zhu and David Lin

SHANGHAI (Reuters) - JPMorgan's (JPM.N: Quote, Profile, Research, Stock Buzz) China asset management venture is considering raising $1 billion to $2 billion for its first overseas investment fund, a product key for diversifying its business risks, the venture's head said on Wednesday.

China International Fund Management Co won official approval early last month to launch the fund under China's Qualified Domestic Institutional Investor (QDII) scheme, which is aimed at easing upward pressure on the country's currency.

Asked how much the Shanghai-based firm aims to raise for the QDII fund, Chief Executive Mandy Wang told the Reuters China Century Summit: "$1 billion to $2 billion will be manageable."

The company is one of a handful of China-based fund houses to receive approval to launch such funds, which can invest in financial markets around the world. The China International fund will focus on Asia, excluding Japan and Taiwan.

Wang said the QDII scheme would help her company and its clients to diversify their risks because investors so far were predominantly exposed to the country's A-share market, which has risen five-fold in the past two years.

REDEMPTION

There are concerns in China's 2 trillion yuan ($265 billion) mutual fund sector that a sharp A-share correction could trigger massive redemptions, as many of China's millions of fund buyers are first-time investors with little investment experience.

"The QDII product is of crucial importance to us. If we only focus on just one market, it will be hugely risky for our clients as well as the company itself," she said at the summit, held at the Reuters office in Shanghai.

The company, which manages more than 70 billion yuan from more than 3 million customers, is 49 percent owned by JPMorgan Asset Management (UK) Ltd.

"What we want is a stable and sustainable business. We don't want a roller-coaster ride," Wang said. She added, however, that she did not expect the A-share market would collapse soon.

Conditions are ripe for QDII to take off in China, Wang said.

"Domestic investors have started to realize that there is a need to diversify risks because they have made a lot of profit from the A-share market."

According to a recent customer survey conducted by her firm, 24 percent of respondents said they would buy its QDII fund to diversify risks while another 25 percent said they would join as they expect high returns from the product, she said.

The fund would target relatively sophisticated investors and a large portion of them would come from the company's existing client base, she said.

The minimum subscription for each investor would be set at more than 1,000 yuan, which is the threshold announced by China Southern Fund Management for its planned $2 billion QDII fund.  Continued...