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Amundi, Blackrock plan China wealth management JVs

Foreign controlling stakes are planned as the race to create wealth management partnerships hots up ahead of the lifting of restrictions next year.

The China Banking and Insurance Regulatory Commission (CBIRC) gave approval for European asset manager Amundi and BOC Wealth Management, the subsidiary of Bank of China, to set up a Shanghai-based asset management joint-venture.

The entity will be 55% owned by Amundi and 45% owned by BOC WM, and plans to open for business during the second half of 2020, according to a media statement.

It will be the first joint-venture company under the CBIRC regulated wealth management framework introduced this year, that has a foreign shareholder holding a majority stake.

In July, China’s Financial Stability Development Committee announced 11 measures to encourage overseas participation in the country’s financial markets. Included were foreign control of domestic wealth management companies (WMCs) and the removal of foreign ownership limits for fund management companies in 2020.

“[The] partnership with Bank of China will allow Amundi to add a new pillar to its development strategy in China,” said Yves Perrier, chief executive of Amundi, in the statement.

It will deploy Amundi’s investment management capabilities and services, while using BOC’s branding and distribution channels.

Amundi was unable to comment further in time for publication.

The French firm already has a 33% stake in a joint-venture, ABC-CA Fund Management, which it formed with the Agricultural Bank of China in 2007. It also offers mainland investors offshore funds under the Hong Kong-China Mutual Recognition of Funds scheme. However, unlike several of its competitors, it does not have a wholly-foreign-owned entity (WFOE).

Blackrock awaits approval

Separately, Blackrock and Temasek have reached an agreement to set up a WMC with China Construction Bank (CCB).

The deal, which will see the world’s biggest asset manager and the Singapore sovereign wealth fund take a majority stake in the venture, is awaiting approval from the CBIRC, according to a source familiar with the transaction.

The WMC will be based in Shanghai and intends to develop and offer onshore products to onshore investors, the source said.

Blackrock declined to comment.

In January 2018, Blackrock’s WFOE gained a private fund manager (PFM) licence to launch onshore funds to China’s qualified investors — that is, institutions and wealthy individuals — and has subsequently launched three onshore products.

Blackrock is still considering options for gaining a public fund management company (FMC) licence, according to the source.

In July, regulators said that foreign firms would be allowed to own a 100% stake in FMCs at some point next year, and without having to shutter their PFMs. An FMC licence would give foreign asset managers access to China’s vast RMB 13.9trn ($2trn) retail fund market.

Moreover — and confusingly — the Asset Management Association of China (AMC) said in the following month that it might allow PFM WFOEs to enter the public (retail) fund industry.

Amid a flurry of announcements by China’s fund management regulators, Blackrock joined Fullerton Fund Management and Neuberger Berman by gaining an investment advisory licence, which allows it to advise domestic fund managers and distributors on specific investment products.

Last week, Vanguard became the first foreign asset manager to join a pilot scheme introduced in October for advisory services in China’s public mutual fund market, when it formed an investment advisory joint-venture with Ant Financial.

China’s new WMCs

Many of China’s banks are establishing WMC subsidiaries in response to recent regulatory reforms, creating opportunities for western asset managers.

In December 2018, regulators instructed commercial banks to break implicit guarantees for principal and interest payments on wealth management products (WMP), effectively precluding their wealth management businesses from future bailouts.

The $4trn bank WMP industry has been a foundation of China’s shadow banking system and a major concern of regulators keen to dampen systemic financial risks.

On the other hand, the CBIRC also relaxed the investment criteria of bank wealth management subsidiaries, allowing them to invest directly in stocks, whereas banks were previously forbidden from doing so.

CBIRC first granted approval for the wealth management subsidiaries of the six large state-owned banks — BOC, Industrial and Commercial Bank of China (ICBC), CCB, Bank of Communications, ABC and the Postal Saving Bank of China.

The wealth management units of CCB and ICBC became the first to open for business in July, while BOC gained clearance to start operations. Earlier this month, JP Morgan Asset Management (JPMAM) formed a “strategic partnership” as a “product provider” to CMB Wealth Management, the WMC of China Merchant Bank.




Part of the Mark Allen Group.