With regulators still hammering out key details of the new bank asset management subsidiary framework, some analysts predict foreign managers moving quickly to form tie-ups now may find themselves wishing they had hit the pause button.
There seems to be a lot of “ready, fire, aim” in play now, amid lingering uncertainties regarding what the business of these joint ventures is actually going to be, said Peter Alexander, managing director of Z-Ben Advisors, a Shanghai-based consulting firm focused on financial market opportunities on the mainland.
Another interesting point, Mr. Alexander said, is that the foreign and local firms in the tie-ups announced so far have long-established ties with other players. For example, Amundi “already has a (fund management company) joint venture with Agricultural Bank of China,” he said. “Are they going to be competing? How does ABC feel about that?”
Despite those uncertainties, Mr. Alexander predicts another half-dozen to 10 partnerships could be announced over the next six to eight months, reflecting in part the pressure big foreign managers are under to build profitable businesses on the mainland.
New opportunities to manage assets for local banks, meanwhile, will effectively add a third major market segment for foreign money managers to pursue on the mainland on top of the fund management company sector and the wholly foreign-owned private fund manager sector.
The latest opportunity is emerging just as China is set, starting in April, to allow foreign firms to become 100% owners of local fund management companies, removing restrictions that had limited them, first, to minority 49% stakes and over the past year to 51%.
The addition of an asset management joint venture overseeing money for bank clients could leave foreign managers with three firms on the mainland, overseen by two different regulators, with different teams, different compliance operations, different boards, all bearing similar brands — a situation that could cause confusion for investors, noted Jackson Lee, Shanghai-based country head, China, with Fidelity International.
