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Fidelity Looks Eastward At Potential China JVs


Despite strict guidelines and barriers within China, which tend to turn off global fund houses from conducting business, Fidelity International is ready and willing to pursue joint ventures there sometime in the near future.

Since 2002, a handful of global financial firms have entered into the Chinese market and successfully set up Sino-foreign fund ventures. However, the international affiliate of mutual fund giant Fidelity Investments has long avoided doing so.

According to Chris Ryan, a managing director for Asia ex-Japan, the reasoning behind Fidelity's newly enthusiastic stance is due to an increase in the flexibility in structure as well as an increase in the choices of partners.

"Obviously, it would depend on us being able to negotiate the right kind of deal with a partner in China," Ryan added. "It's one of the several things we need to do in China."

Investment giant Morgan Stanley will most likely beat Fidelity to the punch in entering the booming Chinese market. Although a spokeswoman declined to comment, sources say that Morgan Stanley is currently awaiting approval of an agreement that would grant them a 40% stake in Jutian Fund Management Co. Estimated to cost $40 million yuan (roughly $5.77 million), the deal could be finalized as early as June.

Northern Trust Enters International ETF Game

In an already crowded field, Northern Trust Corp. is the latest financial-services company to try and make its mark in the exchange-traded fund business, with a family of country-specific ETFs.

"We didn't want to be a me-to' ETF provider, introducing products similar to those already in the market," Northern Trust Chief Investment Officer Steven Schoenfeld told The Wall Street Journal. He also pointed out that the company is receiving "good support" from the ETF industry.

Northern Trust is introducing ETFs that will track locally recognized indexes in foreign markets, particularly in the U.K, Japan and Germany. Plans are also underway for more funds in places like Portugal and Israel.

In a May 15 investor note, Morgan Stanley analyst Paul Mazzilli wrote, "Although less-diversified than other international ETFs, single-country ETFs are usually diversified by companies and sectors."

Mazzilli said ETFs based on country-specific indexes may be attractive to investors interested in targeting exposure to specific countries and/or tailoring their portfolios to a unique group of countries.

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