Tencent intends to launch a fixed income product in Hong Kong via GaoTeng Global Asset Management (GaoTeng), a joint venture with mainland partner, Hillhouse Capital Group.
GaoTeng plans to target Chinese investors at home and abroad with the fund, but will initially focus on mainlanders with overseas assets, Chinese media reported, adding that the firm will adopt a fixed income strategy for the first product.
Differentiation from foreign asset managers will come from having deeper knowledge of the nuances of Chinese investment, according to GaoTeng chief executive officer, Wayne Bi Wanying, who was cited in the report.
Tencent has a 49% stake in the joint venture, with Beijing-based Hillhouse Capital Group, which has $20bn in AUM and specialises in alternative assets such as hedge funds and private equity investments, owning the remaining 51%.
SFC records in Hong Kong show that the joint venture registered to be licensed for Type 4 (advising on securities) on 14 June. It has had a Type 9 license (asset management) since 28 April 2015.
Jennifer Song, equity analyst at Morningstar, told FSA that Tencent’s ultimate goal in the joint venture partnership is not merely to reap profits from fund management.
“Tencent’s advantage in the financial industry is a huge online user base. Through partnering with product and service providers, the internet leader can monetise its existing user base,” said Song, who covers Tencent.
She said the firm’s foray into the finance sector has been innovation-related. For instance, its internet banking arm, WeBank, mainly earns fee income rather than looking for net interest margins like a traditional bank. As a result, Song said she expected the fund joint venture to launch a similar service platform to distribute its own products in addition to funds managed by other firms.
On the product side, supported by Tencent’s technology expertise, the joint venture will likely launch index-related passive instruments, rather than traditional active products, she estimated. She added that Bi has a background of quantitative finance and fixed income investing at Vanguard and Evergreen Investments, respectively.
Alibaba has previously sold wealth management products via its online payment platform. One of its best-selling products is Yuebao, the the world’s largest money market fund. As of the end of 2017, Yuebao managed assets of RMB 1.58trn ($233bn), which exceeded the total aggregate assets of SFC-registered funds, at $159bn, as of the end of 2017, according to data from the regulator.
Of the 1,477 companies holding licenses for asset management activities in Hong Kong, meanwhile, 334 are subsidiaries of mainland asset managers.
