Study: China's private fund market pulling in foreign AMs

By Kate Lin

Added 13th October 2017

China's private fund market and pension funds present business opportunities for foreign asset managers, according to a Cerulli Associates report.

Study: China's private fund market pulling in foreign AMs

Assets in China's private fund industry surged 20% from the end of 2016 to the first half of the year to RMB 9.5trn ($1.44trn), according to the report. On the retail fund side during the same period, AUM grew 12% to reach RMB10trn.

However, recent figures show that private fund industry assets surpassed RMB10trn at the end of August, according to a report from the Asset Management Association of China (AMAC).

Private fund asset growth is increasingly attracting foreign fund managers to China to set up investment management wholly foreign own enterprises (IM WFOEs), the Cerulli report said.

However, managers should obtain a private fund management (PFM) licence from the AMAC to be able to launch onshore private funds to investors, which include institutions and high net worth individuals.

Among the 22 IM WFOE license holders, only four of them – Fidelity, UBS Asset Management, Man Group, and Fullerton Fund Management – have obtained a private fund management (PFM) licence from the AMAC.

After obtaining the license, the asset management firms are required to register with AMAC and launch a product within six months. 

Cerulli Associates believes the managers will have their product strategies prepared while waiting to be registered with AMAC.

“The registration process will be smoother for managers now, compared to last year, given the four successful cases,” said Miao Hui, senior analyst at the research institute who leads the China research initiative.

The study added that managing onshore private funds may come in handy in targeting institutional mandates and mass retail assets in the future.

Pension fund market

Foreign asset managers may also find the pension fund space promising as institutions are starting to outsource their assets more. For example, the National Social Security Fund (NSSF) is selecting new managers and local governments are starting to outsource basic pensions.

The report added that the China Securities Regulatory Commission (CSRC) is seeking public opinion on pension-type mutual funds. Authorities are showing strong determination to complete the pension system and improve fund returns to ease the burden of an aging population.

The experience of foreign firms in managing pension assets in other markets is an advantage. However, to be eligible to bid for such business in China, they should start building their onshore presence and track records early, while maintaining close relationships with regulators, the report said.

 

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