Germany’s 34.1 billion euros pension gives mandate to China stock fund
Despite the mandate, KZVK has maintained a low exposure to the world’s second-largest economy
[HONG KONG] A German pension fund has tapped a Chinese firm’s Hong Kong arm to help it invest in local stocks, in a rare move among global allocators that have been cautious about gaining exposure to the nation’s equities.
KZVK, which manages 34.1 billion euros (S$51 billion), gave US$50 million to Fullgoal Asset Management (HK) in the second quarter, according to sources with knowledge of the matter. The mandate is to invest in Chinese equities listed in Hong Kong, the mainland and the US, the sources said, asking not to be identified as the information is private.
Stocks in China and Hong Kong have seen modest gains following a series of economic stimulus measures since September. But the sharp sell-off in recent years, fuelled by regulatory crackdowns, an economic slowdown and geopolitical tensions, caught many long-term allocators off guard. As a result, analysts note that most China public market mandates are renewals rather than new allocations.
“We have not observed a significant trend of European and US asset owners allocating mandates to Greater China,” said Cameron Systermans, head of multi-asset for Asia at consulting firm Mercer. “This aligns with our current recommendations to clients, to construct equity portfolios without long-term strategic tilts towards individual countries.”
Despite the mandate, KZVK has maintained a low exposure to China. The pension is underweight China relative to the size of its economy and market capitalisation, management board member Oliver Lang said in an interview published in May by Investment & Pensions Europe.
The Hong Kong manager is a unit of Shanghai-based Fullgoal Fund Management, which oversees about US$200 billion in assets and counts Canada’s Bank of Montreal as a shareholder. Its Hong Kong arm manages around HK$30 billion (S$4.9 billion), one of the sources said.
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Cologne-based KZVK, whose full name is Kirchliche Zusatzversorgungskasse des Verbandes der Diozesen Deutschlands, manages funds for more than 240,000 pensioners. Large global institutions, when investing in emerging markets, tend to make a minimum allocation of US$50 million, according to a 2024 survey by Fincity.Tokyo.
Representatives for KZVK did not reply to requests for comment. A spokesperson for Fullgoal Fund declined to comment.
Meanwhile, assets are flowing to other parts of Asia. The number of ex-China equity funds has surged in recent years, with record launches in 2023 and 2024, according to a report published last week by Morningstar. Such funds accumulated an unprecedented US$10.5 billion in net new capital last year.
“The regulatory crackdowns and governance issues, rising geopolitical tensions around the world, and economic uncertainty in China since the Covid-19 pandemic have unsettled investors,” Mathieu Caquineau, a senior principal for equity strategies ratings at Morningstar, wrote in the report. That is “fuelling the appeal of ex-China offerings”. BLOOMBERG
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