Ni Jianda, Jupai
Jupai’s client base has mainly been invested in fixed income. In 2017, 79% of assets were from fixed income products. But the firm has undergone a strong shift in product strategy and today only 36% of assets are in fixed income instruments, the firm said.
Jupai has cut down on bonds issued by property developers and instead is investing in products that allow a stake in ownership, for example, through private equity, convertible bonds and preferred shares. In the first quarter of 2018, 56% of assets were from private equity-type products, compared to 16% during the same period in 2017.
Because of the change in its distribution focus, the client base has undergone a transformation as well. “Apart from minimum threshold of investible assets, our team also assesses potential clients’ risk appetite, since private equity-type investment can be riskier than investing in fixed interests products,” said Ni Jianda, Jupai’s CEO.
Net profit up
At the end of March, Jupai’s total cumulative AUM was RMB 54.5bn ($8.7bn), up 26.5% year-on-year, according to its financial earnings released on Monday.
The total number of active clients who purchased products at least once during the first quarter was 4167. The firm distributes the products via 73 client servicing centres across 48 cities in China and overseas.
The growth of Jupai’s net income in the first quarter was driven by the increase in income contributed by one-time commissions and recurring management fees, the firm said.
Jupai results (RMB)
| Q1 | Y-O-Y | |
|
Net revenue |
433.2m |
17.5% |
| Net income | 115.9m |
27.8% |
Source: Company statement
Regulatory changes
Ni was optimistic about 2018 due to regulatory changes in China.
He cited an improved operating environment for wealth managers and a revamp in rules for the financial and real estate sectors.
“The curbs on non-standardised wealth management products and credit creation in the real estate market are beneficial to Jupai. We do not see such stricter regulatory conditions as challenges. Instead, we are happy that regulations could trigger a consolidation in [China’s] asset and wealth management industries,” Ni added.
He noted that the authority’s ban on so-called “guaranteed” products, which will be phased out completely in 2020, may create an opportunity for Jupai. Wealth management clients who can no longer invest in guaranteed products could move their investible assets from banks to wealth management firms that have standardised products, he said.
He also expects a large-scale industry consolidation will follow the official implementation of new rules and the impact will last up to three years.
“A more regulated market means the overall investment environment is turning more rational and stable. It creates better long-term development.”
In 2018, Jupai estimates that its net income attributable to shareholders for 2018 will surge 30-40% year-on-year to a range of RMB 532.3m to RMB573.3m.
Ni said the estimation is considered conservative. “Our optimistic forecast would likely be more.”
Overseas business
In 2018, the firm said it did not have plans to set up new offices in developed countries like rival Chinese wealth manager Noah Holdings, which is also US-listed.
In March, Shanghai-based Noah established overseas offices in Vancouver and Melbourne to serve offshore Chinese wealth clients.
Jupai’s Ni said it is more important for his firm to strengthen the investment capacity overseas at this stage. “What is important is to expand our partnership with leading foreign private equity managers to offer a variety of products to the existing clients.”
Currently, Jupai is in partnership with private equity firms such as The Carlyle Group and Blackstone, providing their offerings to its overseas investors.
