BEIJING - Value Partners Group Ltd, Hong Kong's largest fund company by assets under management, plans to set up a joint venture on the Chinese mainland to tap its rapidly growing fund industry, Jimmy Chan, the fund's chief executive officer, said on Tuesday.

The fund, which manages $7.8 billion in assets, will soon strike a deal with a mainland securities company, hopefully in the first half of the year, Chan said without revealing the names of the mainland securities companies that are currently in talks with his company.

"We prefer large securities companies on the mainland in the hope that such a partnership may help accelerate the approval process by the regulator," Chan said.

Value Partners is one of the overseas fund companies that have been eyeing the opportunities in China's $350 billion funds industry in recent years. Under the current regulations, overseas fund management companies are allowed to own only up to a 49 percent stake in a joint venture in China.

"Wealth is rising rapidly on the mainland and the investment demand is huge," Chan said. "The mainland fund industry has just begun to show its potential, and we find it very attractive."

The fund is also actively seeking a license to invest in the mainland's A-share market under the Qualified Foreign Institutional Investors (QFII) program. So far it can invest only in mainland equities through the B-share market and trust products of the mainland financial institutions.

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In order to meet the mainland regulator's requirement of $5 billion of assets under management, Chan said the company will transfer part of its assets registered in the British Virgin Islands to its Hong Kong entity and will file its QFII application in 2012.

Alan Wang, a senior fund manager at Value Partners, said that the biggest challenge of investing in the mainland is the speculative nature of the stock market.

"It is still a market dominated by investors that look for short-term returns," he said. "Valuations of stocks tend to be extreme and the biggest risk is from investor confidence."

While liquidity may be tightened in 2011, Wang still expressed optimism about the A-share market given its attractive valuations, and he expects a 20 percent gain of the market amid temporary volatility.

In 2009, Value Partners established a joint venture with Ping An Insurance in Hong Kong to sell exchange-traded fund (ETF) products to retail and institutional investors. The joint venture also launched its first commodity ETF product, an ETF backed by gold physically stored in Hong Kong.

Established in 1993, Value Partners primarily invests in the equity markets of the Asia-Pacific region and more than 65 percent of its clients are from Hong Kong.

The company is the first and only listed asset manager in Hong Kong with a market capitalization of HK$14 billion ($1.8 billion). Its products include a range of absolute return long-biased equity investment funds authorized by the Hong Kong Securities and Futures Commission.