China – AMAC Clarifies The Conditions For Contemporaneous Management Of PE And Securities Investment Funds.

 

25 September, 2018

 

 

On 29 August 2018, the Asset Management Association of China (AMAC) released the Fifteenth FAQ on the Relevant Questions Regarding the Registration and Filing of Private Funds (FAQ) (available herein Chinese), which clarified that the same private fund manager (PFM) may manage both private equity/venture capital funds and securities investment funds provided that it may comply with certain conditions. A manager of both types of funds will be known as an “Asset Allocation Manager”. Previously, the AMAC indicated that a PFM may only manage either private equity/venture capital funds or securities investment funds.

 

At the time of applying for registration with AMAC, a PFM applicant has needed to identify itself as one of the following: (i) securities investment fund manager; (ii) private equity and venture capital fund manager; (iii) other type of fund manager (which typically referred to QDLP etc.). This has caused difficulties for a PFM applicant that proposes to manage both private equity/venture capital funds and securities investment funds to be able to register with AMAC. Now, that obstacle has been removed; with effect from 10 September 2018, the online AMAC registration portal has been updated to allow an applicant to choose the “Asset Allocation Manager” category.

 

Conditions applicable to an “Asset Allocation Manager” licence

 

The FAQ provides that an applicant should satisfy the following requirements in order to register itself as Asset Allocation Manager.

 

Requirements applicable to its actual controller:

 

• at least one entity which is under the common control of the actual controller has registered with AMAC as an ordinary member or as an observant member for more than three years, and on average has an AUM of no less than RMB 500 million in the latest three years; and
• the actual controller may control only one Asset Allocation Manager, and shall undertake in writing to hold its equity in such Asset Allocation Manager for more than three years upon AMAC’s approval of the registration.

 

In addition, the applicant should employ at least two senior executives with more than three years of relevant experience or five years of asset management-related experience.

 

New product – Asset Allocation Funds

 

An Asset Allocation Manager can launch a fund which actively invests in both listed securities and unlisted securities (Asset Allocation Fund). The FAQ requires that an Asset Allocation Fund should be

 

(i) a close-ended fund with at least two years’ term;

 

(ii) a fund of funds; it shall invest more than 80% of its AUM in funds which are registered with AMAC or China Securities Regulatory Commission or otherwise legally established, and shall not invest more than 20% of its AUM in any single fund. Exceptions may apply with respect to fund of one (single investor fund).

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