With China making moves to allow for more and more foreign ownership of financial services firms, global fund managers may want to acquire smaller firms to better establish a local presence, US research and consulting firm Cerulli Associates has said.
According to a statement from Cerulli Associates, its recently released Asset Management in China 2018 report found that China was “liberalising” investors’ access to its funds market.
Earlier this year, China increased the cap on foreign ownership of financial entities from 49 per cent to 51 per cent, with the aim to completely lift this within three years.
Many global fund managers in joint ventures with local banks often experienced difficulties given the banks’ power to effectively push back, Cerulli analyst Ye Kanting said.
“Global managers may find greater opportunities to form JVs with, or fully acquire, smaller players that are struggling to raise assets and profits.”
Foreign fund managers have stepped up their onshore expansion by way of wholly foreign-owned enterprises (WFOEs), and 13 such enterprises have already registered with the Asset Management Association of China (AMAC), according to Cerulli.
Mr Ye said global managers should choose the arrangement that complemented their business structure and to consider selecting the best resources to grow a local team.
“They need not be limited to a single approach, given the greater number of avenues to tap Chinese assets,” the analyst said.
“They will also need a significant amount of patience to deal with regulators, distributors and other players.
“Dealing one-on-one with the [Shanghai Finance Office] and the AMAC will be necessary to participate in the cross-border and private fund sectors.”