Although UBS GAM retains the poll position it was awarded in Broadridge’s inaugural ranking exercise in October 2019, other fund managers are catching up fast.
China fund selectors were most aware of the JPM AM brand, as the firm plans to invest up to $1bn to take full ownership of its China joint-venture, China International Fund Management, according to Yoon Ng, Broadridge’s senior director, Apac insights.
“It was the only global firm recognised by all 50 Chinese fund selectors interviewed,” she told FSA, adding that “Chinese fund selectors are generally more familiar with domestic managers.”
The general rankings for Blackrock and Invesco were unchanged at third and fourth, respectively, although they improved their scores in various criteria.
In particular, Blackrock has accelerated its China expansion through several approaches, including applying to establish a wholly-owned retail (or public) mutual fund business in China on 1 April 2020, the first day allowed by the Chinese authorities. It has also partnered with Singapore’s Temasek to hold talks with China Construction Bank’s wealth management subsidiary to form a new asset management joint venture in the country.
Meanwhile, Fidelity was the biggest climber among the top 10, leaping seven places to sixth as it benefited from a combination of good brand recognition among Chinese fund buyers and the firm’s intention to convert its private fund management licence to a fully-owned retail fund management company under Daisy Ho, newly-appointed Shanghai-based president of Fidelity China, according to Ng.
Schroders and Axa have also made good progress, jumping to number five (from seven) and number seven (from eight) respectively, which “is mainly attributed to their high level of Chinese fund buyer awareness”, she said.
Another big gainer was Eastspring, whose additional headcount in China indicated a stronger strategic commitment to the country, while its local operational capability should be strengthened through access to the resources of its parent company, Prudential, which itself plans to take full ownership of its insurance joint-venture with Citic, according to Ng.
However, Broadridge, a US-based data and analytics firm, warned that foreign fund managers in China still face an uphill struggle.
“Performance will be a major constraint as this is the single biggest factor that affect fund selection and retail investors are used to having double-digit returns in their investment portfolios,” said Ng.
“Brand awareness will also play a part, because despite the prominence of foreign managers on the global stage, they are still not as well recognised as domestic players among both fund selectors and retail investors,” she added.
Broadridge uses six unequally-weighted criteria to compile its rankings.
First, the size of China fund AUM (20%), including mutual fund and ETF assets (but excluding money market products) held in onshore funds investing in China, inbound funds (through the stock connect and qualified foreign institutional investor schemes) and domestic outbound funds invested in overseas markets (through the stock connect and qualified domestic limited partners schemes).
Second, the extent of business scope (15%), which rewards firms for the various types of domestic, inbound and outbound investment licenses and quotas they possess.
Third, local operational strength (25%), encompassing mutual fund joint-ventures, wholly foreign-owned enterprises as well as parent group operating multi-business lines.
Fourth, brand perception in China (20%), where managers are rated based on the results from Broadridge’s bi-annual survey of 1,500 retail investors, supplemented by Chinese fund buyer awareness scores for a few global managers. These include the biggest banks such as Bank of China, China Merchants and ICBC; brokerages including GF and Haitong; and platforms such as Tencent and Howbuy, according to Ng.
Fifth, the global investment strength (10%) of the firm overall, and hence its ability to build and sustain a business in China.
Finally, Broadridge’s assessment based on third-party news sources of a firm’s commitment to China as a strategic priority.
Despite the inroads made by the challengers, UBS GAM, like in last October, was strong across all criteria, ranking high for brand recognition, fund AUM, local operational strength and the extent of its business scope.
On the other hand, relative losers were Allianz Global Investors, BNP Paribas, Credit Suisse, DWS and HSBC GAM, which all suffered a decline in their ranking, mainly due to the recalculation of their China joint-venture fund AUM to exclude money market funds, according to Ng.
The further opening up China’s asset management industry to overseas firms, for instance through allowing full ownership of joint-ventures and the setting up of wholly-owned public mutual funds with access to the country’s RMB 13.9trn ($2trn) retail investor base, will likely continue to entice foreign fund managers.
However, it will be a struggle for many of them to penetrate a market dominated by domestic players.
“We expect this to be a slow and gradual process as it takes time to build up a strong local team, build distribution relationships, establish product line-up and deliver a track record,” said Ng.
“Firms which are buying majority stakes in their existing joint-ventures or are looking at the acquisition of strong domestic firms will have an advantage over the rest.”
China Power Ranking – Top 10 Global Managers