China’s RMB26 trillion (USD3.6 trillion) mutual fund market continues to attract global asset managers, and eight wholly owned foreign fund firms have been set up in the market to date. Backed by professional research teams, as well as extensive global investment experience, foreign managers can provide innovative solutions to meet the diverse needs of investors, the firm says. Foreign managers can use these strengths in areas that are relatively new to China, such as pension funds, index funds, sustainability-themed funds, and Qualified Domestic Institutional Investor (QDII) funds. They can also rely on their expertise to provide investors with more personalised and scientific programs, such as quantitative strategies and robo-adviser platforms. 

Foreign fund managers with established global brands have no problem attracting investors’ attention. However, no matter how strong their financials, investment philosophies, and risk control systems are, global managers in China still need to provide excellent performance and service. Many local fund managers have started to refine their investment processes in recent years, and they are increasingly focused on the stability of investment processes and portfolio risk management, Cerulli says. 

Most foreign fund managers have entered the Chinese market through joint ventures, with only a few starting their activities in the form of solely foreign-owned or foreign-controlled businesses in the past three years. This means they tend to have a smaller domestic customer base and relatively weak fund distribution channels compared to local companies. Foreign managers that are lagging in traditional distribution partnerships with banks may find it expedient to partner with other distributors. Cerulli believes that enhancing cooperation with top securities firms focused on wealth management and online platforms will bring about opportunities for growth.  

Foreign fund managers also face fierce competition from local firms in attracting and retaining talent. Still, they have managed to recruit star managers who are familiar with the domestic capital market and possess local investment experience. Local talent who choose to join foreign managers tend to do so for culture reasons, as the work pressure is generally less intense in foreign firms, and they provide more attractive benefits and better work-life balance, Cerulli says. 

“The entry of global fund houses has intensified competition in China’s asset management industry, but offers opportunities for the entire industry to develop,” says Joanne Peng, research analyst with Cerulli Associates. “For foreign mutual fund managers to succeed in the market, they will have to work on their ability to achieve stable returns and control the risks of their products.”

GF Hong Kong will purchase part of the equity holdings from two major shareholders of Value Partners and is expected to hold 20.20 per cent of Value Partners upon the completion of transaction. The firm writes that this transaction will enable Value Partners to further strengthen its position as a world-class Asia and China specialist asset manager to address the increasing investment needs from institutional and individual investors globally.

Charles Lin, Chief Executive Officer of GF Hong Kong, says: “As one of China’s largest full-service financial institutions by asset size, GF Securities values the opportunity to collaborate with Value Partners as a strategic shareholder. The synergies we create will sharpen our competitive edges in wealth and asset management. The move is also in line with GF Securities’ strategy to expand the firm’s global footprints.  We believe that with joint efforts, GF Securities will be able to further advance sustainable economic growth and capture financial opportunities in China’s Greater Bay Area.”

Dato’ Seri Cheah Cheng Hye, Co-Chairman and Co-Chief Investment Officer at Value Partners, says: “As one of the largest independent asset managers in the Asia region with more than 30-year track record of delivering investment values to our clients, Value Partners is delighted to collaborate with GF Securities through this strategic investment. The partnership will not only significantly increase Value Partners’ reach to mainland Chinese investors, especially in the Greater Bay Area, through GF Securities’ strong distribution network, but also strengthen our investment capabilities across different asset classes in China. We are confident that our collaboration with GF Securities as a strategic shareholder can generate synergies and bring long-term and stable returns to the company’s shareholders and investors.”