Franklin Templeton is exploring options with its China joint venture, including potentially buying out its partner Sealand, according to Tariq Ahmad, its head of Asia Pacific.
“There are ongoing discussions. We have been partnering with them. Sealand is our onshore distributor when it comes to retail. Offshore we cover China through a QFII type of strategy in Hong Kong. I would say Franklin Templeton’s strategy is to remain committed to China. We are looking at our JV quite seriously at the moment,” he said.
When asked by FSA whether this would entail potentially buying out Sealand, Ahmad (pictured) responded: “That’s one of the options we have on the table we are looking at quite seriously.”
Ahmad’s comments come as a number of foreign asset managers are reassessing their approach to mainland China.
In 2021, BlackRock became the first foreign firm to obtain approval from China’s securities regulator to set up a wholly owned mutual fund business.
The China Securities Regulatory Commission then paused its approvals until a flurry of announcements late last year. Manulife Investment Management, JP Morgan Asset Management and Morgan Stanley Investment Management all received approval to buy out their local partners, for example.
Despite the approvals, foreign asset managers have so far struggled to gain much traction in mainland China, struggling to compete with their domestic counterparts who have built up a strong track record over many years.
Franklin Templeton Sealand Fund Management is viewed as one of the more successful JVs having been operating in Shanghai since 2004.
“At Franklin Templeton, as you know, we have been the first movers in many emerging markets, in many local markets. And China remains one of those where we are really looking to accelerate more so than we have historically.”
tariq ahmad, head of asia pacific, franklin templeton
This year has been a tough year for anyone betting on China as asset managers have struggled to launch new products as the country’s reopening rally quickly fizzled out and the net asset value of products launched by foreign investment firms has dwindled.
However, Ahmad takes a longer-term perspective and is still upbeat about the prospects there.
“We’re thinking of the market three to five years ahead, recognising that geopolitics are there,” he said.
“But beyond that, China obviously for us is meaningful. At Franklin Templeton, as you know, we have been the first movers in many emerging markets, in many local markets. And China remains one of those where we are really looking to accelerate more so than we have historically.”
Ahmad noted also that having concluded its fiscal year at the end of last month, this was the best year in Asia Pacific in terms of net sales in almost a decade.
Ahmad noted that the industry was also going through a lot of flux with fee compression and consolidation, but said that Franklin Templeton had benefited from their focus as a pure-play active manager.
In terms of AUM, he said that this was split pretty evenly in the region between institutional and wealth at the moment, although there was a goal to eventually increase the proportion that comes from wealth to about 60%.
He also noted that customisation had been an important factor in attracting wealth and the investment firm had had success in building out semi-liquid products focused on private credit.
Private credit has been quite topical lately as the preponderance of floating rate notes within the asset class has insulated it from some of the pain seen in the fixed-income market following interest rate hikes, not to mention the fact that there is no need to mark-to-market.
