The teenage years can be tough, especially in a home environment where the rules are always changing.
China's fund management industry is a case in point.
Fifteen years after regulators issued the first fund management company license in China, and five years into a stubborn bear market for the country's A shares, the industry continues to struggle as artificially high risk-free rates of 5.5% to 6% effectively crush domestic investor interest in equities, said Xu Lin, special assistant to the CEO of Shanghai-based HFT Investment Management Co. Ltd.
That interest rate structure left fund management companies overseeing between 2 trillion and 3 trillion renminbi ($323 billion and $482 billion) in mutual fund assets over the six years through the end of 2013, according to data provided by Z-Ben Advisors, a Shanghai-based consultant on investment management business opportunities in China. (All dollar figures in this story are in U.S. dollars.)
By contrast, for that same period, data from the China Trustee Association, Beijing, show trust company assets jumped to 10.91 trillion from 1.22 trillion renminbi, according to Z-Ben's data.
With Shanghai's composite index down roughly two-thirds from its pre-crisis peak in October 2007 and, following a short-lived bounce in 2009, down again by roughly a third, the fund management industry “hasn't lived up to the expectations that many would have had for it,” said Nick Gardiner, a Hong Kong-based partner and managing director with Boston Consulting Group's investment management practice.
Even so, industry executives and analysts predict some of China's current crop of 90 fund management companies should have a good shot at leveraging competitive advantages at home to become significant regional or global players in the coming decade — something few Asia-based managers can boast.
Most of the industry's biggest players — including Beijing-based China Asset Management Co. Ltd., and Harvest Fund Management Co. Ltd.; Bosera Asset Management Co. Ltd. and China Southern Fund Management Co. Ltd., both of Shenzhen; and GF Fund Management Co. Ltd., Guangdong — have set that goal.