KKR and BlackRock get permission to invest Chinese funds overseas

A man stands on an overpass with an electronic board displaying Shanghai and Shenzhen stock indices, at Lujiazui financial district in Shanghai, China January 6, 2021. REUTERS/Aly Song

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HONG KONG, May 10 (Reuters) – KKR (KKR.N) and BlackRock (BLK.N) have received Chinese regulatory approvals allowing their newly created local units to raise funds for overseas investment, official documents show. .

The approvals are the largest of their kind so far this year and signal that Beijing is moving forward with opening its financial markets to foreigners despite concerns over currency depreciation and prolonged COVID-related lockdowns in its financial center, Shanghai.

The two companies’ fund units have passed their final hurdles to obtain quotas from China’s nine-year Qualified National Partnership Program (QDLP), according to filings, allowing them to invest funds raised onshore, from affluent and institutional investors in offshore funds.

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The yuan has fallen about 5% in just over three weeks, and the yuan’s sharp depreciation in the past has prompted Chinese authorities to suspend overseas investment programs such as the QDLP, halt the issuance of licenses and quotas for fear that capital outflows would amplify undesirable currency volatility. .

But the latest regulatory move “mainly sits on the policy continuum,” Nicholas Omondfi, director of Shanghai-based consultancy Z-Ben Advisors, told Reuters.

There is recognition over the years among multiple financial authorities, he said, that the domestic market is internationalizing and bringing in global expertise will be beneficial in some ways.

“QDLP is an integral part of this path forward, so I wouldn’t expect a reversal of the quota promises that regulators have made.”

KKR registered its wholly-owned fund management unit with the Asset Management Association of China (AMAC) under the QDLP program on April 21, according to an official filing from the industry regulator.

Registration, in accordance with local rules, means that the US private equity firm can now start raising funds for overseas investments. It took about nine months for KKR to complete the registration process, which is a de facto approval system.

It is one of 24 asset managers, Chinese and foreign, who will share $5 billion in QDLP quota. The program has allocated more than $50 billion in allowances through local governments since its launch in 2013.

Separately, BlackRock’s fund management unit has become the first wholly foreign-owned retail fund manager to obtain a QDLP license, according to an official statement released last week by the Shanghai Municipal Office of Finance Service.

“Despite the impact of the COVID outbreak, several global asset managers are still actively applying” to enter the QDLP pilot project, the statement said, adding that they “firmly believe in” Shanghai’s future as a as an international financial center.

KKR and BlackRock declined to comment on the endorsements. AMAC did not immediately respond to a request from Reuters for details. The Shanghai government declined to comment beyond its statement last week.

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Reporting by Selena Li; Additional reporting by Brenda Goh in Shanghai; Editing by Sumeet Chatterjee and Edmund Klamann

Our standards: The Thomson Reuters Trust Principles.

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