Bank of China creates world-first $150m fund in NZ

In a ground-breaking move for the institution globally, the Bank of China (BOC) NZ has launched the first of what could be many locally-domiciled funds aimed at meeting the legal obligations of Chinese immigrants seeking residence in New Zealand under investor exemptions.

Eric Wei, BOC NZ head of family office, said the $150 million wholesale fund, created under the auspices of the NZ Department of Immigration, attracted investments from 62 Chinese ‘investor’ migrants.

“The fund launched on July 15 and closed on August 4,” Wei said. “We raised about RMB713 million [close to NZ$150 million] and have just completed the transition to NZ currency.”

He said the fund had invested in a mix of NZ fixed income and equity assets via underlying managers AMP Capital and Nikko Asset Management (which collectively look after the bond portfolios) while Devon Funds Management picked up the local equities mandate.

Wei said a second fund of about $100 million with the same underlying managers was slated for release in October.

Prior to joining the BOC NZ last year, Wei spent three years as principal investment analyst at the Financial Markets Authority following an almost two-year stint as a consultant with Mercer NZ.

Under government rules, potential immigrants with at least $1.5 million to invest in NZ assets can move to the country without meeting the usual immigration criteria. The Department of Immigration offers two investor visa options: category 1 for those with $1.5 million and up to $10 million to invest in NZ assets; and, category 2 applies to those with $10 million and more to invest.

According to the investor visa rules, category 1 and 2 investor immigrants must keep their funds invested in NZ assets for at least four years and three years respectively.

The quota for category 1 immigrants is set at about 300 annually while category 2 is uncapped.

Earlier this year the government announced a partnership deal with the local arm of the BOC to boost Chinese education and tourism opportunities in NZ.

At the time, David Lei Wang, BOC NZ executive director, said the agreement would “also enable Bank of China customers’ access to immigration approved investment funds in New Zealand”.

Wang’s previous role was assistant CEO of BOC Singapore branch, responsible for overseeing the bank’s Prestigious Wealth Management unit for the ASEAN countries. Prior to that he was general manager of private banking BOC Beijing, responsible for establishing BOC’s fist private banking centre worldwide. Under his management, Bank of China was awarded the Best Private Bank in China by Financial Times in 2010.

Wei said the NZ fund represented the BOC’s first foray into creating country-specific investment products using outsourced asset managers.

“This could serve as a model for the rest of the [BOC] group,” he said.

The BOC NZ was also pioneering the family office approach for the wider bank, Wei said.

As well as the immigrant-focused funds, he said the BOC NZ was considering a number of other products aimed at both offshore and local investors.

“China has a big private wealth market,” Wei said, “and NZ, which offers relatively high yields, could be seen as an attractive place to invest. There’s good potential for us to develop investment solutions for that market.”

He said the BOC would only build wholesale products for the time-being, which exempts it from complying with the managed investment scheme (MIS) regime.

BOC NZ used Mercer as investment consultant for the new funds with BNP Paribas filling custodian duties and Public Trust as trustee.

The BOC, which is majority-owned by the Chinese government, registered as a NZ bank in November 2014. Both the China Construction Bank and the Industrial and Commercial Bank of China were also registered as NZ banks over 2013-14.

Source: Investment News New Zealand

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