Posted inBusiness moves

BNY Mellon tries China again with WFOE

BNY Mellon announced plans to re-enter China's domestic investment management market by joining the growing number of firms establishing a Wholly Foreign-Owned Enterprise (WFOE).
The Bund in Shanghai, China
View of the historic Shanghai Financial District and Huangpu Riverfront

BNY Mellon Investment Management said in a statement that it had obtained regulatory approval to incorporate the WFOE. It still needs to obtain a private fund management license before the new entity can sell funds to domestic clients.

The new firm has been set up in the Shanghai Free Trade Zone. It is a wholly-owned subsidiary of BNY Mellon’s Hong Kong investment management division.

“In the short term, it will help us drive client connectivity with existing clients in China,” wrote Lindsay Wright, head of distribution and co-head of the firm in Asia Pacific, in an email to FSA. “Over time, it also provides a platform to establish onshore manufacturing for our investment boutiques and distribute domestic investment funds locally.”

Second try

The new WFOE is BNY’s second attempt to penetrate China’s domestic asset management industry. In 2010, BNY Mellon set up a joint venture with Xi’an-based Western Securities. Four years later, in October 2014, it exited the business by selling its 49% stake to Shanghai Leadbank Asset Management for $24m.

Foreign firm joint ventures with domestic Chinese asset management firms, are permitted to offer investment funds to retail customers. However, the Chinese side must hold the majority stake.

By comparison, the WFOE structure permits the foreign firm to sell funds, but limits the scope to institutional and high-net-worth investors.

BNY Mellon is the latest among global investment management firms exploring this new avenue to enter China’s growing investment management industry.

In January 2017, Fidelity was the first foreign firm to obtain a private fund licence for its WFOE subsidiary.

Vanguard launched its WFOE in May, Invesco obtained a WFOE license in April. Other firms with their own WFOEs include Allianz Global Investors, Neuberger Berman, Aberdeen Asset Management, JP Morgan Asset Management and others.

Part of the Bonhill Group.