BlackRock to Close China Private Fund After Just Three Years

The headquarters of BlackRock Group in New York, USA. Photo: IC Photo

A unit of BlackRock Inc., the world’s largest asset manager, is closing down its private fund business in China after just three years and instead will focus on mutual funds, in a move to meet regulatory requirements.

BlackRock’s wholly owned unit in Shanghai, BlackRock Investment Management (Shanghai) Co. Ltd., on March 23 withdrew its private fund manager registration in China, the Asset Management Association of China (AMAC) website (link in Chinese) showed.

The company registered at the end of 2017 to act as a private fund manager to raise money from eligible onshore investors to invest in the A-share market. The withdrawal means the Shanghai unit can no longer operate private fund business on the Chinese mainland.

The move comes as BlackRock in August won approval from China’s securities regulator to set up a wholly foreign-owned mutual fund management company (link in Chinese), the first on the mainland, as part of the firm’s ambitions to expand the scale of its business.

To avoid conflicts of interest, BlackRock Investment Management must liquidate its private fund products or transfer them to its mutual fund platform before it rolls out mutual fund products, as required by Chinese regulations.

Sources close to regulators told Caixin that Fidelity International and Neuberger Berman Group LLC, both of which have also applied to set up wholly owned mutual fund units in China, will also have to close their private fund businesses there.

BlackRock Investment Management had three private fund products registered with the AMAC, managing a total of nearly 1 billion yuan ($152 million), according to previous AMAC data available last year.

New York-headquartered BlackRock, with $8.7 trillion in assets under management, last year started to liquidate some of the Chinese private funds, with the AMAC website on Wednesday showing it had liquidated all the three products ahead of schedule.

Another BlackRock unit — BlackRock Overseas Investment Fund Management (Shanghai) Co. Ltd. — was set up (link in Chinese) in August 2015 as a Qualified Domestic Limited Partner (QDLP), allowing it to raise funds from the mainland for investment in overseas markets.

Chinese regulators allow foreign-owned fund managers to keep their QDLP in operation while their other entities are applying for mutual fund licenses, but they need to ensure appropriate risk control and that executives cannot work for the QDLP and mutual fund entities at the same time, the sources said. BlackRock has launched two QDLP funds on the mainland, both of which are still in operation.

BlackRock’s new mutual fund manager — BlackRock Fund Management Co. Ltd. —is led by Tang Xiaodong, who joined BlackRock in 2019 and previously worked at China’s securities regulator. He is now chairman of the new firm.

Unlike BlackRock, Vanguard Group Inc., another of the world’s biggest asset managers, earlier this month dropped its application — which a regulatory source said was going smoothly — to set up a wholly owned mutual fund company in China. Vanguard said it will instead focus on growing its business in China through its robo-advisory joint venture with Chinese fintech giant Ant Group Co. Ltd.

Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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