In early 2017, we became the first Australian super fund to secure a QFII licence in China.
A QFII (Qualified Foreign Institutional Investor) licence allows us to trade and invest directly in Chinese stocks listed on mainland markets - without going through intermediaries.
China is a very attractive long-term investment location, offering enormous scale across multiple asset classes, such as shares, property and fixed interest. There is also potential for outstanding returns and unique diversification benefits.
To take advantage of China’s exceptional investment opportunities, you need to be close to the market and establish a positive relationship with the regulators so you can listen and respond to their needs. Our QFII licence is an important step towards achieving this proximity.
This licence gives us the flexibility to design customised mandates that cater for our different considerations like no tobacco stocks, our environmental, social and governance (ESG) requirements and our fee budget. It also helps to remove some agency/intermediary risk, having a positive flow on effect of reducing costs to members.
The recent slowdown in China’s economy is a sign that China is moving gradually from a high debt-fuelled growth phase to a more sustainable growth phase. A more stable investment environment is good news for offshore investors like us and an exciting development for members. We now have better access to a much broader investment universe and opportunities in the world’s second largest economy, which should lead to strong returns for members.
Securing our QFII licence is quite literally a licence to leverage China’s growing economy. Since we began investing in China in late July 2017, our investments have returned just under 20%, well above benchmark performance.
"My wife is from Shandong and in 2013 I went back to her hometown... A whole new city had been built nearby but it was largely empty, which made me think that all the stories about Chinese ghost towns must be true.
But when we went back in 2015, this empty town was now full of people. After just two years, it had businesses, schools and all sorts of modern facilities. It made me realise how dynamic the country really is".
Henry Zhang, First State Super Senior Investment Analyst
From L to R: Damian Graham (First State Super Chief Investment Officer), Michael Dwyer (First State Super CEO), Li Jiange (Chairman of the Board of Trustees of Sun Yefang Foundation) and Henry Zhang (First State Super Senior Investment Analyst).