The growth prospects of China's fledgling third-pillar private retirement savings market could find global managers — just back from hanging out shingles on their wholly foreign-owned enterprises in Shanghai or Shenzhen — revisiting the joys of being partners with local managers in joint ventures or strategic alliances.
That shift in focus to partnership from independence reflects the fact that the newest pillar of China's retirement safety net is being built around mutual fund vehicles — the sector of China's asset management market where global managers continue to face significant, if receding, ownership hurdles.
While reforms look set to open China's mutual fund market to wholly owned foreign competitors as early as 2021, some global players are moving to dip their toes into the waters sooner.
In August, Fidelity International — which avoided joint venture minority partner status when that was the only means of serving local investors on the mainland — announced a strategic partnership with Beijing-based China Asset Management Co. to develop target-date fund products for the new third-pillar market.
Other global heavyweights are looking to follow suit.
"At this stage, the easiest and the quickest way for us to get access" to a target-date fund-of-funds opportunity in China central to T. Rowe Price Inc.'s core value proposition "is through a partnership with a local asset manager," said Thomas Poullaouec, the firm's Hong Kong-based head of multiasset solutions, Asia-Pacific.
"We've already had some talks with a couple of asset managers, and hopefully we'll be able to announce something during the course of the year," he said.
One Shanghai-based executive with a foreign manager, who declined to be named, said after years of fighting to plant their flags in China, the fact that it's still necessary for foreign firms to employ a buddy system to chase opportunities on the mainland is frustrating.
Foreign players in China seem to be forever on the outside with their noses at the window, hoping to come in and have a seat at the table, he said.
Still, compared to even a few years ago, China's money management market has a far greater number of moving parts, creating potential openings for foreign firms to compete more fully in coming years.