The firms have partnered to develop new and hopefully superior ways to access mainland China stocks without some of the risk distortions that can arise.

TOBAM, the Paris-headquartered asset management firm, and a Chinese group have joined forces to build an investment strategy linked to performance of mainland China’s A-shares market.

The European group is partnering with China Asset Management Company, aiming to exploit increased demand for A-shares since after Morgan Stanley Capital International announced last year that these equities are now being included in the flagship MSCI Emerging Markets benchmarks from 1 June this year.

The partnership puts together two asset management big-hitters: China Asset Management Company, founded in 1998, has more than $153 billion in assets under management (as at the end of December last year); TOBAM manages $9.5 billion (at 29 December).

The Anti-Benchmark® China strategies devised by the two groups will seek to maximize diversification across the CSI indexes (CSI 300, CSI 500 & CSI 800 universes) by applying TOBAM’s patented Maximum Diversification® approach, which is designed to avoid the risk biases that more traditional allocation methods such as market-cap weighting can lead to.

ChinaAMC will use its knowledge and access to the Chinese A-Shares equity markets and complement this with TOBAM’s research capabilities and unique Anti-Benchmark® approach, the firms said in a statement yesterday.

“The strategy could prove a compelling solution for large, sophisticated institutional investors, well aware of the limitations of the market cap-weighted indices and actively looking for options to invest more efficiently,” the groups said.

“Also, the Anti-Benchmark® CSI 300, CSI 500 and CSI 800 Equity strategies are potentially attractive for non-domestic investors who believe in the Chinese growth story but would like to access it in a diversified way,” they said, arguing that CSI indices typically have high concentrations of risk.