ICBC Credit Suisse loses half of onshore assets

China’s mutual fund industry grew by 5.2% in the first quarter of 2018 to reach RMB 12.4trn ($1.95trn) on 31 March, according to the latest available data from Amac.

ICBC-Credit Suisse Fund Management, which was once China’s biggest firm in terms of AUM, lost half of its onshore assets in the one year period ending 31 March. The total AUM of the firm was down to RMB 129bn from RMB 337.2bn year-on-year, according to Amac data.

According to Morningstar data, ICBC-Credit Suisse Fund Management’s drop in assets were caused by a strong net outflow from its bond funds (those categorised as “aggressive bond funds” and “pure bond funds”), representing a total of RMB 129bn.

During the period, the joint venture firm had net inflows in only four categories. They are: QDII global equity, QDII Greater China equity, Shanghai-Hong Kong-Shenzhen equity and short-term bond.

Rankings and joint ventures

Amac data shows that E Fund Management, Bank of China Investment Management and China Asset Management Company are the three largest asset managers by AUM.

Of the top 20 onshore firms, half of them are domestic and the rest are foreign joint ventures. To the end of March, a total of 45 Sino-foreign asset managers have set up onshore, data compiled by Amac shows.

Money-market funds remain the most popular product in China’s mutual fund market. Money-market fund assets are RMB 7.32trn ($1.09trn).

This year, aiming to slow the growth of the products, China’s regulator instructed external research and rating firms to exclude money market fund assets when ranking asset management firms.

Joint venture ownership has also changed. Until recently, foreign asset managers could own only up to 49% of a Chinese fund management firm. The country’s regulators have recently increased the limit to 51% and announced plans to remove the cap completely in three years, allowing 100% ownership of domestic asset managers by a foreign firm.

However, only a small number of large foreign asset managers are expected to apply for approval to hold a controlling stake, according to Sean Hung, senior analyst at Moody’s Investors Service. The main reason is the unwillingness of mainland partners to sell their stakes.

“The mainland partners do not lack capital, so it would be unlikely they would sell their stake for financial reasons,” Hung told FSA.

Smaller and lesser-known foreign firms will be more dependent on Chinese partners in joint ventures than the global giants, he said, adding that small firms will need to rely heavily on the domestic partners for distribution and local expertise.

China’s top 20 asset management firms

Source: Amac, Company websites, FSA. Rankings by onshore AUM, excluding money market fund assets, as of Q1 2018.