A slowdown in the growth of China’s asset pool is not deterring new entrants among fund managers.
More asset managers are setting up shop and launching new products in China, alongside the existing managers, says independent consultancy Z-Ben Advisors. The market expects the development of a defined contribution scheme in China to lead to a pick-up in the growth of assets.
In the second quarter there was $35.45 billion in assets under management in China, a 16% increase on the previous quarter, according to Z-Ben. However, this is a slowdown from the growth seen earlier in the year. From the fourth quarter of 2003 to the first quarter this year the total size of industry assets rose by 50% from $20.72 billion to $30.55 billion.
Despite the deceleration in asset growth, the number of new entrants into the fund management industry in China continues to grow. The total number of fully operational managers ? those with an operational licence and a product offering ? has grown from 26 at the beginning of the year to 36 at the beginning of August, according to Z-Ben. ?The number of new players can also be expected to grow for the remainder of the year and well into next year,? says Z-Ben founder Peter Alexander.
More but smaller funds
Between April and July this year the number of Sino-foreign joint venture fund managers increased from three to nine and the number of domestic managers grew by three to a total of 27. New domestic fund managers include Industrial Fund Management, Lion Fund Management and China Nature. Joint venture firm SYWG became fully operational in April.
From the end of the first quarter to August 9, 23 new funds were launched, raising a total of $9.1 billion. In the first quarter, 11 new funds were launched, raising a total of $9.2 billion.
Between the end of the first quarter this year and August 9, the average size of new funds was $396 million while in the first quarter new funds raised an average of $836 million each. On August 20, joint venture firm Everbright-Prumerica concluded fundraising for its maiden product. Alexander says: ?While official numbers have not been reported, we understand that the firm has raised approximately $300 million.?Joint venture China International is also raising funds for its first product and it is expected to conclude on September 10.
Z-Ben’s Alexander says: ?Interest in fund products during the first quarter should be considered an anomaly with all new products seen as a success if funds raised an average of between $200 million and $300 million.?
Sino-foreign joint venture asset managers have increased their share of total assets from 8.6% in the fourth quarter last year to 18.9% at the end of the second quarter. Alexander attributes this to strong product offerings from joint venture firms.
The expansion of the enterprise annuity scheme, a DC scheme in experimental stages in a number of northern China provinces, should increase the size of assets to be managed by fund managers and insurance companies.
Alexander says: ?It has been reported that total enterprise annuity assets were $4.23 billion at the end of last year.? He adds: ?Once the programme has been expanded, total assets should grow exponentially over the ensuing three to five years with the potential of those assets reaching $120 billion by 2010.?
Z-Ben estimates that total industry assets under management will reach $40 billion this year, $57 billion in 2005 and $73 billion by the end of 2006.
