Global asset management firms are poised to enter China's market on their own terms for the first time, after 17 years of an enforced buddy system with local majority partners.
That could leave wholly owned foreign managers with teams of portfolio managers and analysts on the mainland competing for onshore mandates from Chinese institutional investors of $1.2 trillion by 2020, up from $240 billion at the end of 2014, according to a recent estimate by Z-Ben Advisors, a Shanghai-based consulting firm.
On Sept. 22, U.K.-based Aberdeen Asset Management became the first foreign manager granted a license to set up a wholly foreign owned enterprise in China's Shanghai free-trade zone with “investment management” included in its scope of business.
Three weeks later, on Oct. 14, London-based Fidelity Worldwide Investment announced it, too, had established a WFOE in Shanghai to “facilitate future expansion plans,” which include offering “domestic investment capabilities to China-based institutional investors.”
A U.S. money management executive in Hong Kong, who declined to be named, said making it easier for foreign firms to do local business in China will focus attention on whether the “traditional asset management company joint venture” — which accounts for roughly half of the country's more than 100 fund management companies — remains a “valid business model.”