JP Morgan Asset Management has overtaken UBS Asset Management to become the best-performing foreign fund manager in China this year, according to Z-Ben Advisors’ fifth annual assessment. Previously, UBS AM was the best-performing firm for two consecutive years.
This year, the leading five firms, which include Invesco, Schroders and Blackrock, head the rest of the 25 asset managers on the list by some distance. (see table below).
In terms of regions, Europe leads in terms of the number of firms that made it on the list (12), followed by North America (10) and Asia (3).
In Asia, the debut of Nomura Asset Management marks Japan’s return to the top 25 after a one-year absence, the report noted. Previously, Nikko Asset Management was on the list in 2018.
Top 25 foreign asset management firms in China
Within the list, the firms that have significant ranking improvements from 2016 include Fidelity (top 6 now, previously 16) and Morgan Stanley Investment Management (top 10 now, previously 20). Fidelity “built significant infrastructure in pursuit of a wholly-owned mutual fund licence”, while Morgan Stanley IM “made large steps to obtain controlling stakes in existing platforms”, the report said.
On the flipside, BNP Paribas Asset Management, which was number 3 in 2016, fell below the list as its “limited WFOE build-out has led to a reliance on [its] joint-venture stake”.
Importance of an onshore presence
Z-Ben’s overall score is calculated by adding the weighted scores of three distinct business lines: onshore business, which covers joint venture stakes and wholly foreign-owned enterprises (WFOEs); outbound business, which covers capital raised onshore for offshore investment, such as the qualified domestic limited partnership (QDLP) programme; and inbound business, which includes Greater China fund management capabilities and various inbound investment channels, such as the qualified foreign institutional investor (QFII) and its renminbi equivalent (RQFII) schemes.
Each of the three categories is assigned a weighting that is based on its importance to current and future China strategy, according to the report. The onshore business score has the highest weighting, followed by the inbound business. The outbound business has the lowest weighting due to the capital outflow controls enforced previously by regulators, the report added.
It noted that in previous editions of the China rankings, the joint venture fund management firm was weighted higher due to the current ability to raise Chinese capital. However, in this year’s edition, the WFOE and joint venture entities have similar weightings, highlighting the optionality of an onshore China strategy, the report noted.
On the onshore business front, Invesco tops the list, followed by JP Morgan AM and UBS AM.
The report added that firms at the top are accelerating their pace in the mainland and made moves to both build their own infrastructure and buy larger stakes in existing platforms. This year, the onshore business proportion of the top 25 firms increased to 63%, which compares with 55% last year.
Similarly, Broadridge Financial also recently published its inaugural China Power Ranking, in which UBS AM heads the list for the second time. Broadridge’s ranking methodology is slightly different, as it also includes other factors such as brand perception and the global investment strength of the firm overall.
