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Goldman Sachs sets up wealth JV with China partner

Goldman Sachs Asset Management (GSAM) has gained preliminary approval to form a wealth management joint venture with Industrial and Commercial Bank of China (ICBC).
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The US firm will have a majority stake (51%) in the JV, with ICBC Wealth Management, a subsidiary of China’s biggest bank, ICBC, owning 49%, according to a statement by GSAM late on Tuesday.

The joint venture will develop a broad range of asset management products to domestic investors in China over time, including quantitative investment strategies, cross-border products and innovative solutions in alternatives, the US firm said.

The establishment of the joint venture has received preliminary approval from the China Banking and Insurance Regulatory Commission (CBIRC).

“This joint venture with China’s pre-eminent financial institution will accelerate our objective of establishing a leadership position in one of the world’s largest, fastest-growing wealth management opportunities,” said Tuan Lam, head of the client business for Asia Pacific ex-Japan at GSAM.

Investable assets held by Chinese households are set to surpass $70trn by 2030, with about 60% to be allocated to non-deposit products including securities, mutual funds and wealth management products, according to Goldman Sachs Global Investment Research.

Wealth management JVs

Earlier this month, Blackrock CCB Wealth Management was granted approval by the CBIRC to start its asset management business in China, almost nine months after receiving the go-ahead to set up the venture.

The company is 50.1% owned by Blackrock, 40% by CCB Wealth Management — a wholly owned wealth management subsidiary of CCB – and 9.9% by Temasek, the Singapore sovereign wealth fund.

China’s Financial Stability Development Committee announced several measures in July 2019 to encourage overseas participation in the country’s financial markets. Included were the removal of foreign ownership limits for fund management companies in 2020 and allowing foreign control of domestic wealth management companies (WMC).

France-based asset manager Amundi and BOC Wealth Management, the subsidiary of Bank of China, were the first to gain approval to set up a joint-venture under the new wealth management framework. The entity is 55% owned by Amundi and 45% owned by BOC WM, and launched its first product in December 2020.

Subsequently, JP Morgan Asset Management expanded its “strategic partnership” in March 2021 with CMB Wealth Management, the WMC of China Merchant Bank.

Many of China’s banks established WMC subsidiaries in response to regulatory reforms, creating opportunities for western asset managers.

Set up in 2019, ICBC Wealth Management was one of the first commercial bank wealth management companies approved by the CBIRC to begin operations.

Goldman Sachs expanded into the mainland Chinese market in 1994 when it opened representative offices in Beijing and Shanghai, and subsequently set up a securities joint venture in China. The firm has increased its ownership in the firm, Goldman Sachs Gao Hua, to 51% after receiving regulatory approval in 2020, and has started the regulatory process to acquire the remaining stake to own 100% of its China businesses.

GSAM had more than $1.9trn in assets under supervision as of 31 December 2020, according to the firm.

Part of the Mark Allen Group.