Chinese authorities have taken steps to stop companies from investing in certain sectors offshore, such as property. But asset management buyouts have apparently been given free rein.
Most recently, Zhejiang Zhongnan (ZZ) UK acquired London-based Peterhouse Asset Management in a management-backed buyout. It also acquired Peterhouse (Capital) Guernsey. The two entities have been renamed to South River Asset Management and South River (Guernsey), respectively, and together managed $100m.
Products offered by South River include the group’s flagship Gold and Precious Metals Fund, as well as a suite of multi-asset funds and segregated mandates for institutions including UK universities.
ZZ UK is a subsidiary of Zhejiang Zhongnan Holdings Group, a Chinese diversified conglomerate. The group operates multiple units, which operate in a wide variety of industries, including petrochemical energy and animation production.
Another mega-company, state-owned China Post Group, initially established to offer postal service domestically, acquired the Market Access range of ETFs from Royal Bank of Scotland in 2016. The agreement included the ETFs listed on the exchanges of Germany and Switzerland. They are now managed by subsidiary China Post Global (CPG).
In January, CPG listed its Market Access iStoxx MUTB Japan Quality 150 Index Ucits ETF on the London Stock Exchange.
Perhaps the most ambitious conglomerate has been Hainan-based HNA Group, which is involved in a variety of businesses, including real estate, tourism and its core business of aviation (The group has recently been in the news for inability to meet debt obligations).
In March 2017, HNA became a stakeholder in Old Mutual’s US asset management unit, buying 25% of holdings in OM Asset Management. At the time of transaction, the stake was worth $446m.
In early 2017, it also bought $200m stake in SkyBridge Capital, a New York-based investment management firm. The deal is expected to complete by the end of this month.
Late last year, an undisclosed company, which some media reports claimed was HNA Group, was in discussions with the co-founders of Value Partners about acquiring ownership. The Hong Kong-listed asset manager announced in January that the discussion with a potential buyer was terminated “as a result of the parties’ commercial consideration”, according to its filings to the local exchange.
Prior to that, HNA Group expressed interests in German asset manager Allianz in September last year, Reuters reported, citing unnamed sources.
Separately, in 2016 mainland insurer Anbang was also in discussions about acquiring a controlling stake in Allianz, the report said. To date, Allianz has yet to enter into ownership agreements with the firms.
Buying expertise
Consultancy firm Casey Quirk, a part of Deloitte, said strategic M&A and cooperation with foreign managers will be the key to developing a China-based global asset management firm.
“A global asset management leader in China won’t be produced organically,” said Daniel Celeghin, head of wealth management strategy in Asia-Pacific.
He expects a clear home-grown global leader to emerge in five years, catalysed by mergers and acquisitions.
Chinese conglomerates might find it easy to discover acquisition targets abroad but M&A in asset management is rife with potential problems, FSA reported earlier.
