StarRock to be first China PE firm to enter mutual fund space

According to the China Securities Times, StarRock is so far the only PE firm to respond since the China Securities Regulatory Commission's (CSRC) invited domestic firms to raise mutual funds.

StarRock plans to set up an operationally independent department and utilize most of its existing manpower to develop its mutual fund products. It will largely rely on outsourcing banks or brokerage firms for distribution. The firms' mutual funds will pursue similar investment strategies to that of its private funds, aiming to attract investors who are seeking higher yields compared to mutual fund averages.

According to the draft rules introduced by CSRC earlier this year, private funds investing in securities will be allowed to raise capital publicly if they have at least RMB10 million ($1.6 million) of paid-in capital, and assets under management of at least RMB3 billion over the last three years. It is estimated less than 10 would qualify.

However, the National Development and Reform Commission (NDRC) nixed the plan, reminding private equity managers that they are prohibited from running retail funds and investing in publicly traded securities.

The invitiation to domestic PE fund managers to launch mutual funds has so far received a lukewarm response from private equity firms, mainly because there is a lack of clarity over which regulator should report to.

PE funds managers have said they are uninspired as the gulf in strategy between PE funds and mutual funds is too wide to be bridged at present. Private equity is so different in terms of business model, development strategies, corporate culture, team building, skill sets and market research, said one renminbi fund-of-funds manager.

Established in 2007, StarRock has more than 30 private funds under its management, with a total AUM of RMB4 billion.

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• Topics
• Greater China
• Regulation
• Renminbi fund
• China
• Renminbi
• NDRC
• CSRC