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China May Net Investors as It Overhauls Pension System

The Organisation for Economic Co-operation and Development, a nonaligned forum for governments, had recommended even back in 2007 that China invest its pension income in shares and real estate.

The pension reserve fund, one of the world's largest, already allows giving some mandates to external asset managers. More managers would be hired if China invested in riskier assets, particularly offshore.

China likes its own firms, asset managers or otherwise, for security reasons and nationalism but also values offshore expertise for global investments. Given those trends, I expect Sino-foreign joint venture asset managers will receive a lot of offers to handle pension funds.

Specifically, Gottex Fund Management (GTTXF) of Switzerland and its proposed JV partner Shanghai-based VStone Asset Management would have a good shot at grabbing any alternatives mandates. Australian asset management firm AMP Capital might win a shares mandate through its partnership with China Life Insurance Co. (LFC).

Deutsche Bank (DB) and the America International Group (AIG) could rack up some accounts if a Chinese pension fund picked Beijing-based Rongde Asset Management, a company in which the two Western investors have taken a 35% stake via their own JV Cathay Capital.

Mandate sizes? Big. "With China's staggering pension assets, financial liberalization could provide the outlets for investment," China Central Television says in an online report in September. The country's premier, it adds, "has highlighted pension services as a sunrise industry to drive economic restructuring."

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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