PIMCO Overweights Chinese Fixed Income Assets: APAC Head | SFC Exclusive
Harry Wu, journalist for Southern Finance Omnimedia Corp (SFC)
As China steadily promotes opening-up of the financial market, new opportunities are emerging for global investors.
In a recent exclusive interview with 21st Century Business Herald, Alec Kersman, Head of Asia-Pacific at PIMCO, said that China is a vast market with abundant talent and has always maintained an open and welcoming attitude toward foreign institutions and investors. Whether in macroeconomic analysis, portfolio management, or business development, China has always been a key component of PIMCO’s global strategy.
China is an indispensable part of the global economy and financial system—this is no longer a novel viewpoint. Kersman explained that for many years, any in-depth macroeconomic analysis must include a thorough understanding of China’s economic trends. Without a solid grasp of China’s current status and future direction, it is impossible to form a comprehensive global macro perspective.
Kersman said that PIMCO currently holds a slightly overweight position in Chinese sovereign bonds and other fixed income assets and expects this stance to remain stable in the medium term. Given the size, importance, and investment opportunities in the Chinese market, PIMCO regards it as a key region within its global fixed income portfolio.
Meanwhile, global investors are showing increasing interest in currency diversification, no longer limiting themselves to US dollar assets. Although the US dollar remains the world’s primary reserve currency, demand for assets in RMB, JPY, AUD, and other currencies is steadily increasing. The rising role of the RMB as a global currency also reflects structural changes in the international financial system.
Looking ahead, as China transitions from an export-driven economy to one driven by domestic consumption and innovation, and as it makes breakthroughs in high-tech sectors such as artificial intelligence and new energy vehicles, Kersman believes these developments will continue to create new investment opportunities and further enhance foreign investors’ interest in the Chinese market.
PIMCO is a global leader in active fixed income investment, with nearly USD 2 trillion in assets under management. Kersman is managing director and head of PIMCO in Asia-Pacific, responsible for setting the strategic direction for the region and leading a team of professionals to deliver investment solutions and service to Asia-Pacific clients. He has 24 years of investment and financial services experience and holds an MBA from Harvard Business School and a J.D. degree from the University of Buenos Aires, Argentina.
Alec Kersman, Managing Director and Head of Asia-Pacific at PIMCO
The growing importance of the Chinese market
SFC: Welcome back to Shanghai. What is the main purpose of your visit to China this time? From PIMCO’s global strategy perspective, where does the Chinese market stand today?
Kersman: China holds an extremely important position in our global business layout, which is why I visit China at least twice a year. On this trip, I visited both Beijing and Shanghai. Over the past two decades, we’ve been providing asset management services to Chinese institutional investors and have established long-term, stable partnerships with this country. We are very encouraged by the current initiatives being promoted and the prospects for future development.
I also had in-depth discussions with our team in China to explore new ideas and opportunities for business growth in the country. I must say, this is a very exciting time. Each visit further strengthens my confidence in the potential of the Chinese market. It’s incredibly rewarding to be part of and witness this process firsthand.
China is an indispensable part of the global economy and financial system—this is no longer a novel viewpoint. For many years, any in-depth macroeconomic analysis must include a thorough understanding of China’s economic trends. Without a solid grasp of China’s current status and future direction, it is impossible to form a comprehensive global macro perspective. This has remained true over the years.
At PIMCO, our macroeconomic research covers multiple dimensions, including sovereign debt and credit research. We dedicate substantial resources to studying China’s market dynamics. In our discussions on global market views, China is always at the core—whether as the world’s second-largest economy or as one of the largest bond markets globally. Looking at the next five to ten years, China’s importance will only continue to grow.
Whether in macroeconomic research, portfolio management, or business strategy, China is a critical part of our global framework. We’ve had a presence in Asia-Pacific for nearly 30 years, with our first office established in 1996. In fact, our first office outside the US was opened in the Asia-Pacific region.
SFC: In your view, what is the biggest challenge PIMCO faces in expanding its business in China?
Kersman: I don’t believe we face any significant hurdles in expanding in China, and that’s one of the reasons I’m here. Over 20 years ago, we began serving Chinese institutional investors. In 2018, we established a Wholly Foreign-Owned Enterprise (WFOE) in China and later received Qualified Domestic Limited Partner (QDLP) quota from the Shanghai Municipal Financial Regulatory Bureau. Since then, we’ve built a significant local client base. These have all been gradual, correct, and long-term-oriented steps, and I don’t anticipate major constraints going forward.
China is a vast market with a rich talent pool and has always been open and welcoming to foreign institutions and investors. To reinforce our long-term commitment to the Chinese market, we recently appointed Stephanie He as our Head of China. She is based in our Shanghai office and is responsible for overseeing and advancing our strategic development and business operations in China.
The Greater Bay Area holds great potential
SFC: As China continues to open its financial markets, how do you view the future role of the Greater Bay Area (GBA)?
Kersman: The Greater Bay Area represents a significant strategic opportunity, and we’ve been closely monitoring and researching this region for quite some time. We’re seeing continued growth in capital flows through the Southbound and Northbound investment channels. This region indeed holds tremendous potential, and its development will be gradual and incremental.
Currently, most Southbound capital is being allocated to fixed deposits in Hong Kong banks. Although some of it is flowing into investment products, the overall proportion remains small. This is an area we are closely watching and plan to actively participate in at the right time.
We remain optimistic about the growing interest from both individual and institutional investors and look forward to seeing an expansion in the range of investible products in the market. We view the GBA as an emerging and important market opportunity. We are monitoring relevant policies and market developments closely and hope to see further progress in the near future.
We have been paying close attention to the Cross-boundary Wealth Management Connect Scheme in the GBA and believe this mechanism will continue to expand. We’ve also studied the Mutual Recognition of Funds scheme and are evaluating whether it aligns with PIMCO’s product strategy. We regularly review these cross-border investment opportunities and will consider increasing our involvement when the time is right.
SFC: What are your long-term expectations for the development of Wealth Management Connect?
Kersman: Wealth Management Connect presents an extremely attractive opportunity. Given the large population of the region, including Hong Kong and Macao, the growth potential is enormous.
Over the past few years, the scheme has made steady progress, with positive developments in both the Southbound and Northbound investment flows. Meanwhile, regulators have continued to refine and optimize the framework to meet evolving market needs.
Looking ahead, this trend is expected to continue. Both investment opportunities and investor interest will continue to grow. At the same time, ongoing improvements to the regulatory framework will help foster the development of financial products that truly meet investor needs. In the long run, the Cross-boundary Wealth Management Connect Scheme is poised for great success.
Unlocking opportunities through QDLP
SFC: In recent years, the QDLP pilot programme has expanded rapidly in multiple cities. What progress has PIMCO made in this area? Amid the rapid development of China’s asset management industry, does PIMCO have any new strategies or product plans for the China market?
Kersman: The QDLP pilot programme has delivered very positive results. When the regulators launched this mechanism over a decade ago, they demonstrated remarkable foresight. QDLP has played a crucial role in gradually opening up China’s financial markets. We believe it is a highly effective policy innovation, and we are proud to be part of it. We also believe this positive momentum will continue, with the programme expanding steadily at a pace aligned with the regulators’ direction.
To date, we have launched three strategies under the QDLP framework, and we may consider introducing additional products next year. Our primary objective is to offer the right products at the right time to truly meet the needs of investors.
SFC: In the past, many Chinese investors preferred high-return investments in the property market. In the current environment, do you think fixed income assets will become more attractive to Chinese investors? What are your suggestions for global asset allocation in the future?
Kersman: The answer is a definite yes. For many years, Chinese investors have benefited significantly from real estate and equities. While opportunities still exist in those sectors, more and more investors are beginning to realize the importance of building a diversified and balanced portfolio—one that includes equities, fixed income, and multi-asset strategies. Such portfolios can deliver more resilient performance across different market environments. Over the past five years, awareness of this concept has grown significantly, which also explains why PIMCO’s Balanced Income and Growth strategy under QDLP has been so well received by both Chinese and global investors. Looking ahead, as long as QDLP quota is available and market conditions are right, we will continue to launch new products under this framework.
We believe that high-quality global fixed income assets offer exceptional value in the current environment. Considering the possibility of a US economic slowdown in the second half of this year, along with potential rate cuts from the Fed, investors can benefit from attractive yields and potential capital appreciation. Increasingly, sophisticated investors are allocating to high-quality bonds or constructing balanced portfolios that combine fixed income stability with equity growth potential.
SFC: How does PIMCO leverage the QDLP mechanism to meet the growing global asset allocation needs of Chinese high-net-worth individuals and institutional investors?
Kersman: It’s important to understand what these investors are really looking for. For many Chinese investors, global asset allocation is a new stage in their investment journey. Historically, their focus has been on property and equities. As market cycles evolve, they are starting to see the importance of balancing high-risk and low-risk assets. When these investors begin allocating offshore, the first thing they look for is a trustworthy partner—a firm with strong professional capabilities and a solid track record. PIMCO’s core advantage lies in the fact that we build long-term relationships based on trust, supported by a globally consistent and stable investment process.
Collaboration over competition
SFC: How do you see the role of foreign asset managers evolving in China? What is PIMCO’s vision for the next five years in China?
Kersman: We believe that the role of foreign asset managers in China will continue to grow. Whether in terms of investment or business development, the Chinese market offers tremendous opportunities. We are actively exploring various ways to deepen our engagement. At PIMCO, we always approach our development in China with caution and prudence, ensuring that our investment pace and scale are in line with our global strategy and truly aligned with the needs and opportunities of both local and global investors.
Looking ahead over the next five years, we will continue on the same trajectory we’ve followed over the past five years. I will also continue to visit China frequently to explore new areas of growth and opportunity.
SFC: Foreign and Chinese financial institutions each have their strengths and weaknesses. How do you view the relationship between PIMCO and Chinese institutions—competition or cooperation?
Kersman: We are fortunate to have been operating in China for many years and to have received strong support from the local financial ecosystem. We also highly respect and appreciate the professionalism and prudence of Chinese regulators, who have demonstrated foresight and responsibility in promoting market development.
At the same time, we have established close partnerships with numerous Chinese financial institutions. In my view, PIMCO’s presence in China is not about competing with local firms. Rather, we aim to bring over 50 years of global investment management experience into the Chinese market, contribute our expertise, and learn from outstanding domestic peers.
We work with asset management companies, banks, trust firms, and various distribution channels. I see this more as collaborative progress to advance the market, rather than pure competition. Our goal is to work together to expand the market space, create more opportunities, and achieve mutual success.
SFC: Compared to local Chinese institutions, what are the core differentiators of PIMCO’s products in China?
Kersman: It really depends on the market cycle and the asset class. For example, investors interested in China A-shares may prefer well-known domestic equity managers. However, when it comes to offshore investment opportunities, PIMCO offers differentiated solutions backed by decades of experience. Ultimately, investors will choose the products that best meet their needs.
Overweighting Chinese fixed income assets including sovereign bonds
SFC: Given the current global geopolitical and monetary policy uncertainties, how does PIMCO view China’s bond market? What are your views on its medium to long-term prospects?
Kersman: We believe there are plenty of attractive investment opportunities in China’s bond market. At present, we hold an overweight position in Chinese fixed income assets and expect monetary policy to remain accommodative over the next few months. Overall, we maintain a cautiously optimistic view on China’s bond market, with a neutral stance on risk exposure.
China’s bond market is one of the largest in the world. Active participation in this market is crucial for both our local and global clients. It holds strategic importance for us.
We have already established a strong presence and deep involvement in the Chinese bond market, dedicating significant research resources and maintaining a relatively high allocation to these assets. Currently, we are slightly overweight in Chinese sovereign bonds and other fixed income assets and expect to maintain this position over the medium term.
Given the size, importance, and investment opportunities of the Chinese market, we see it as a key region in our global fixed income strategy. Among global bond markets, China is one of the largest and offers the greatest growth potential. We will continue to strengthen our investment and engagement in China.
SFC: How do you view the global attractiveness of RMB assets? Has PIMCO observed any shifts in global investor sentiment toward RMB-denominated bonds?
Kersman: We are seeing growing interest in currency diversification among global investors, with less focus on US dollar assets alone. While the dollar remains the dominant global reserve currency, demand for RMB, JPY, AUD, and other currencies is steadily increasing. The RMB’s role as a global currency is steadily expanding, reflecting broader changes in the international financial system.
China has made significant progress in the internationalization of the RMB and outbound investment. The pace of further advancement will depend on global factors. That said, the RMB’s global status is rising, and the trend toward currency diversification is creating real opportunities.
SFC: In recent years, as China has rapidly developed in artificial intelligence and other high-tech fields, more companies have increased their investment in China. Do you think this will attract more offshore funds to allocate to Chinese assets?
Kersman: I believe that is very likely. As China transitions from an export-driven economy to one driven by domestic consumption and innovation—making breakthroughs in fields such as artificial intelligence and new energy vehicles—new investment opportunities will continue to emerge. This structural transformation will further enhance offshore investors’ interest in the Chinese market.
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