Chairman and CEO, Jianda Ni
Quarterly net revenue was up 37.5% year-on-year to RMB440.8m ($66.3m), according to the firm’s financial results announcement.
The Chinese firm has both asset and wealth management operations. Revenue consisted of 60% from one-time commissions, which are generated by product distribution (wealth management). Recurring management fees (asset management) contributed another 20%.
On the wealth management side, the firm mainly serves Chinese high-net-worth individuals who live abroad. About 4,000 are active wealth management clients who purchased a product at least once during the third quarter, the firm said.
In the asset management operation, total assets under management as of the end of September were RMB50.1bn, up 70% year-on-year.
However, Jupai also reported that third quarter operating costs and expenses surged 32.6% year-on-year to RMB272.4m. Year-to-September, operating costs and expenses were up 33.6% compared to the same period in 2016.
Harry He, investor relations director, said on a conference call that rising costs were largely due to “higher compensation expenses, particularly the commission fees paid to wealth management advisors and client managers, as well as marketing, advertising and brand promotion expenses”.
The best selling product last year was fixed income, largely in the real estate sector, most of which are managed by the firm. The product strategy has been fixed-income and private equity fund offerings. Officials said they are diversifying the product range, but did not provide details.
Management forecast that in the fourth quarter the firm will report quarterly net revenue growth of 36%-42%, which would put net revenues at RMB460m to RMB480m.
“In terms of revenue, we are confident that Jupai will maintain a high double-digit growth in the next couple of years,” said chairman and CEO, Jianda Ni, on a conference call through a translator. “We believe net operating margin will be around 20% in the foreseeable future.”
Jupai results (RMB)
Source: Jupai Holdings
In regards to industry developments, Ni said through a translator that the increasingly popular robo-advisories are targeting the mass affluent, while Jupai focuses on high net worth investors.
He added that an increasing number of wealth managers are planning to launch IPOs and the universe of top-rated portfolio managers is getting broader.
“Jupai is glad to see all this happening,” Ni said. “We believe we eventually we will be able to witness the birth of several world-class Chinese wealth-management companies within the next decade.
“It is just the beginning for Sino-foreign cooperation in the industry. Partnering with foreign firms will eventually bring about a more mature investment environment in China,” Ni added.
Last week, Chinese authorities said they will allow foreign firms to own a majority stake in local securities ventures, fund managers and insurers. Commenting on the move, Ni told FSA he believes the policy change is positive for the industry.
“The government has shown gradual increasing confidence in opening up the market. With the new rule enacted, Jupai will see a wider range of high-quality overseas partners to choose from,” he added.
In early 2016, Julius Baer took a minority stake in the firm. Officials declined to provide details about plans for the partnership.
Shanghai-based Jupai and Noah Holdings are the only two China-based wealth management firms publicly-listed in the US.