BMO announced yesterday that it was expanding its relationship with ICBC, the largest state-owned Chinese bank by assets. The two banks signed a new bilateral agreement in November.
One of the primary objectives of the new pact is to allow the asset management unit BMO Global Asset Management to tap into the client base of ICBC and to develop products that cater to the investors on the mainland, according to BMO.
The two banks are in discussions about launching fund-of-funds (FoFs) managed by ICBC, which would invest in BMO’s ETFs, the firm added.
China’s financial regulator China Securities Regulatory Commission (CSRC) has approved the first batch of six fund-of-funds (FoFs) in September 2017. Despite the early stage of retail FoFs in the country, the products managed to raise a total of RMB 16.6bn ($2.5bn) in assets during their initial public offerings.
According to FoF guidelines set by the CSRC, a retail FoF will have to invest more than 80% of its assets in other CSRC-approved funds, but cannot invest more than 20% of its assets in one fund.
The Canadian bank’s partnership with ICBC goes as far back as 1997. Initially, it included cooperation in risk management training, trade finance and correspondent banking.
Apart from asset management, the new agreement will cover cross-border cooperation on renminbi and sharing of fraud reduction techniques, according to Gilles Ouellette, group head at BMO Asset Management.
In addition to this partnership, BMO owns a 28% interest in another Chinese asset manager Fullgoal Fund Management. It has also formed a joint venture with Fullgoal.
At the end of October 2017, BMO Global Asset Management managed $252bn of assets, according to its website. It has listed seven ETF products in Asia.
ICBC has been also developing other partnerships. In October 2017, the bank’s asset management arm revealed bold plans to grow internationally through partnerships with Blackrock and Goldman Sachs AM.
ICBC AM also has a separate joint venture with Credit Suisse, targeting mainland investors, which managed assets of RMB 447.3bn ($67.59bn) at the end of 2016, according to data from Cerulli Associates. Excluding money-market funds, the joint venture became the largest asset manager in China in the second quarter of 2017.