China manager readies to enter Australian insto market

Just weeks out from getting its Australian Financial Services License and a few months off launching two Australian unit trusts, China-focused Mingshi Investment Management is arguing that investors need to look beyond the recent geopolitical rhetoric.

Speaking to Financial Newswire, Mingshi’s Australian-born International chief executive, Lewis Prescott acknowledges the challenges associated with conveying the China investment message amid the geopolitical headlines but he suggests that pragmatism will pay off.

Directly asked about investor resistance to China, he said the answer was not as straight forward as it might seem.

“The answer is yes and no because when we go out marketing or speaking to people about China whether it’s in Australia, whether it’s in Europe or whether it’s in the US there’s usually two camps of investors – those that were already interested in China and the China opportunity or those who were not interested or were sitting on the fence,” he said.

“Without question the over-arching geopolitics and headlines have certainly had a negative impact on those on the fence investors or people who are unfamiliar with state of play, but those who are familiar with China or have been looking at it for a number of years and are much closer to the real news of the equity market or the changes that are happening there it doesn’t faze them at all,” Prescott said.

“So, if you talk to global allocators or even some of the major allocators in Australia that are invested in China or are looking to invest in China then the passing geopolitical headlines don’t really move the needle on their multi-year plans,” he said.

Mingshi signalled its intentions in Australia when it appointed veteran former Allianz Global Investors country head, Michael Negline as its country head and it is making clear that it is keen to tap institutional investors.

Prescott emphasises that while Mingshi is a Shanghai-based manager, it strongly adheres to the level of compliance you’d expect to see in any global investment manager.

“We are quantitative systematic fund, we are not a traditional bottom-up manager – we build programs and systems to adapt with the market.

Mingshi estimates that the optimal global equities allocation to China is approximately 38% of a global equities portfolio.

“Increasing China-A allocation to this level can improve annualised return by 2.58% and Sharpe ratio by 0.08,” Prescott said.

Mingshi is a quantitative investment manager and describes itself as having, for over a decade, combined the best of financial economics and computer science to generate uncorrelated alpha signals specific to China’s capital markets.

It has over 60 investment professionals dedicated to research, trading, risk management and technology and US$3 billion in assets under management as at 31 December.