Fidelity Eyes Chinese Mutual, Pension Fund Markets

Fidelity International said it is looking into getting into the mutual fund and pension fund market in China, according to a report from Reuters.

“China is a market of high strategic importance to us,” Daisy Ho, Fidelity’s managing director for Asia excluding Japan, told a news conference in Shanghai. “Any development in opening up China’s capital markets, whether it’s about the mutual, private or pension fund market, we’re hugely interested.”

The Chinese market has been ripening for foreign and institutional investors over the past year. In February, Chinese pension funds began investing in securities in a move to boost returns. It was a significant departure from their traditionally low-risk, low-return strategy that involved leaving the funds in banks, or investing in treasury bills. And in November, the Chinese government said limits on foreign ownership of joint ventures in China’s financial services sector will be relaxed over the next five years.

Fidelity Investment Management (Shanghai) Co., Ltd., a wholly foreign-owned enterprise under Fidelity International, was founded in 2015, and earlier this month was approved to run a private equity investment fund management business by the China Securities Investment Fund Association.

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Fidelity International said it will provide domestic investment products to qualified institutional investors, and high net worth individuals in China, which it said “will have far-reaching significance for Fidelity International’s long-term strategy in China.”

Fidelity’s China Country Head Jackson Lee told Reuters that the company, which launched three private funds in China in the past year, would not be forming joint ventures in local markets. He added that Fidelity’s newly-launched equity fund would benefit from the company’s existing research capabilities, and experience investing in China’s yuan-denominated shares.

Fidelity International has been operating in China since 2004, and has established cooperation with banks through qualified domestic institutional investors (QDIIs) to provide investment services.

“China is significant to Fidelity International’s global growth strategy,” said the company. “We are ready to assist domestic investors in capturing long-term investment opportunities in China.”

Tags: China, Fidelity International, Mutual Funds, Pension

The Fire & Police Pension Association of Colorado is suing nine banks, including six from Canada, accusing them of rigging the Canadian Dealer Offered Rate (CDOR) to improve their profits.

The proposed class action lawsuit was filed in US District Court in Manhattan against Royal Bank of Canada, Deutsche Bank, HSBC, National Bank of Canada, Bank of America, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce.

The pension has accused the banks of suppressing the CDOR from Aug. 9, 2007, to June 30, 2014. It says the banks colluded to keep CDOR rates low by intentionally quoting lower rates because they were emphasizing derivatives businesses that required them to pay rates based on CDOR, according to The Wall Street Journal. The suit claims the lower rate saved the banks money and increased profits on interest-rate swaps, as well as other CDOR-based obligations.

The pension fund is seeking unspecified damages for investors for alleged violations of US antitrust, commodity and anti-racketeering laws. CDOR is the rate at which banks are willing to lend to companies in Canada. It is calculated daily by Thomson Reuters based on rate submissions from banks.

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According to the complaint, the Colorado fund conducted more than $1.2 billion of CDOR-based derivatives transactions during the alleged violations. The fund accused the banks of coordinating false CDOR submissions because their CDOR-based derivatives portfolios had become much larger than their CDOR-based loan portfolios. The CDOR-based derivatives portfolios are what the banks make interest payments on, and they collect interest from the CDOR-based loan portfolios.

The pension also claims the alleged violations included 151 consecutive days when four of the banks made identical submissions.

The case is Fire & Police Pension Association of Colorado v Bank of Montreal et al, US District Court, Southern District of New York, No. 18-00342.

Tags: Big Banks, Canadian Banks, Fire & Police Pension Association of Colorado, Litigation, Pension