Shanghai-headquartered quantitative asset manager Mingshi Investment Management is the process of bringing its investment capabilities to Australia. It will shortly launch two funds - a market neutral fund and a long only fund - that will offer Australian investors access to the China onshore equity market.
Notwithstanding current geopolitical risks, China recorded strong growth in 2021 of 8.1 per cent, and it now has the world's second largest share market.
Lewis Prescott, partner and international chief executive officer at Mingshi Investment Management, is an Australian native but is now based in Hong Kong. He spoke to Industry Moves about the investment manager's plans for Australia.
Why is important to build a presence in Australia and why now?
As part of our international growth, Australia was always on the roadmap from day one. And that's for two reasons. Number one, I'm familiar with Australia and so is our COO Stephen Zhou. Turns out his family is from Australia as well. So, we have a personal connection to Australia. And also obviously, it's a great professional opportunity here ... in terms of the super funds and the advisor market. There's a lot of sophisticated investors in Australia and structurally we think there is a under allocation to the China market at the moment. And so, we think we're a unique company ... that can come and provide a differentiated service.
You don't think there's anything like this in Australia?
I'm almost sure there's not. We are a USD2.5 billion AUM quantitative China-focused investment manager. We do systematic quantitative strategies - market neutral and long only. And I don't believe, I'm almost sure, there's not a single other quantitative manager purely focused to the China A-share market and what I mean by that is the genuine onshore market - Shanghai and Shenzhen.
What's the institutional interest been like?
Strong. I think, from institutions globally, from US to Australia to Europe, everyone understands that increasing their allocation to China benefits global portfolios with respect to alpha or liquidity, diversification, etc. But it's about finding the right manager - managers who you trust, managers that have the institutional standards that you expect out of Europe, Australia or the US. Exactly how do you enter China is really the bigger question, not whether you do or not.
Is it hard getting traction in Australia?
Australia requires longer track records and more relationship building than, say, the US. The US is very fast to move just given the nature of how they invest. I don't think it's difficult to get traction [here] but you really have to be committed to the Australian market. Be here for the long haul, build a strong track record, which is what we plan to do.
I think I think some other international managers that I've seen in my career that come to Australia, they just try to see if they can tap the super market with no meaningful investment. That's not the way to do it.
We have an office here. We have a full-time person here, Michael Negline, who's our head of Australia. We plan on building up a team here. We're launching two AUD domestic funds within the next couple of months. Because we have that personal connection to Australia, it's very easy for us, we plan on being the investment manager of choice for China exposure for the Australian institutional market.
Do you have funds under management targets for Australia?
The China A-share market is the second biggest equity market in the world. We certainly have capacity to run multiple billions. And, you know, hopefully we get there. But the thing with Australia is it's definitely a long-term play. We plan on setting up the funds in the next couple of months, but it could be two or three years before you see significant inflows. That's just the nature of the Australian cycle.