(Bloomberg) -- At a time when some foreign investors are heading for the exits, UBS Asset Management is boosting its presence in China as the world’s third-largest bond market opens further.
“We’re actually doubling down,” said Hayden Briscoe, head of fixed income for Asia-Pacific at the firm which manages the equivalent of about $645 billion of assets. “We’ll be hiring portfolio managers and traders, both on the equity and debt side and a team of people to support them.”
Foreigners own a mere 3 percent of China’s local currency bonds, but adding notes from the nation to global indexes including those from Bloomberg Barclays, JPMorgan Chase & Co. and Citigroup Inc. would bring cash into the country from yield-hungry investors from New York to Tokyo. Morgan Stanley said earlier this month that the inclusion of Chinese government bonds in major bond indexes could trigger $250 billion to $300 billion of inflows into China onshore notes. The moves are also spurring other global asset managers to hire.
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Citigroup Index LLC said this month that Chinese onshore sovereign bonds are set to join some of its gauges but omitted them from its key World Government Bond Index, while Bloomberg Barclays Indexes, owned by Bloomberg, overhauled its China fixed-income gauges and started a Global Aggregate + China index on March 1.
Briscoe said that the inclusions are the “warning shot across the bow for everybody to get ready.” He declined to comment on the number of hires the firm plans to make but said that it is “applying for our WFOE status within China,” referring to the wholly foreign-owned enterprise designation.
Foreign funds with investment management enterprises that have that status can raise money from onshore institutional and high-net-worth investors once registered with the Asset Management Association of China.
The moves focused on China’s bond market come even as UBS Group AG, the asset management unit’s parent, is trying to widen its scope by assigning more bankers a pan-Asian focus and pushing them to pursue deals that aren’t directly linked to the health of the broader Chinese markets.
UBS Asset has also been readying China funds and in March launched its China High Yield Bond fund, which invests in U.S. dollar and yuan debt.
With China now the world’s second-largest economy, UBS Asset is positioning itself to take global investors onshore. “You need to get China right if you want to get Asia right,” Briscoe said.
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