Schroders has become the latest firm that has taken the necessary step to tap into China’s massive $3.1trn retail mutual fund market.
The firm yesterday filed an application with the China Securities Regulatory Commission (CSRC) to establish a public mutual fund management company (FMC) in the mainland, according to the regulator’s records.
“Applying for a full MFC licence is an important next step for us in our strategy to grow our asset management business in China,” Lieven Debruyne, global head of distribution at Schroders, told FSA.
In China, the firm already has a joint venture FMC with Bank of Communicaitons, BOCOM Schroders, which was set up in 2005. Schroders also set up its wholly foreign-owned enterprise (WFOE) in Shanghai in 2015, which offers six private fund products to domestic qualified investors, including institutions and high-net-worth individuals.
“We feel the retail savings market and the pension market are ready for investment strategies from global firms like Schroders that can provide an alternative approach to the local asset managers in the country,” Debruyne said.
Without elaborating, the firm plans to include sustainable investments in its offering when the FMC is established, amid the growing interest in ESG products in the mainland.
“Our FMC licence application can provide diversified solutions, particularly in sustainable ivnestments and digital as the China market continues to evolve,” said David Guo, Schroders’s China CEO.
Five other foreign managers have applied for the FMC licence, which includes Alliance Bernstein, New York-headquartered Van Eck, Blackrock, Neuberger Berman and Fidelity So far, only Blackrock has received the license, while the other three still awaiting regulatory approval from the CSRC.
China officially lifted the investment limitation for foreign fund management firms with a mainland joint venture in April last year, allowing 100% ownership.
JP Morgan Asset Management is also expected to acquire 100% ownership of its mainland venture China International Fund Management (CIFM). According to a statement from the Shanghai United Assets and Equity Exchange in August last year, JP Morgan AM will need to pay RMB 7bn ($1.02bn) to buy out the JV, which industry players find expensive.
Vanguard is also preparing for the application after it appointed Luo Dengpan as its general manager for the yet-to-be-established retail FMC in China in September last year, which is a significant step before a firm can apply for the license.