JPMorgan is to spend close to $1bn buying out its minority partner in China International Fund Management, taking advantage of China reforms that came into force on April 1 that eliminated caps on foreign companies taking full control of local asset management operations.
China is the third largest asset management market in the world behind the US and UK with assets under management of $5.3tn, according to an estimate from Morgan Stanley, the investment bank, and Oliver Wyman, a management consultancy. It is forecast to grow to $9tn by 2023, providing western fund managers with their single biggest growth opportunity globally over the next decade.
In recent months Beijing has moved more quickly to allow greater foreign participation in its financial sector, partly in response to the trade war with the US. Last year officials brought forward the timeline for full foreign ownership of securities, futures and fund management companies to 2020.
JPMorgan did not disclose financial terms for the minority stake in CIFM it is buying from local partner Shanghai International Trust, part of Shanghai Pudong Development Bank. However, it paid a more than 33 per cent premium to CIFM’s net asset value when it spent $35m last August lifting its stake from 49 to 51 per cent. Assuming a similar valuation, the remaining 49 per cent stake is worth close to $1bn.
Dan Watkins, JPMorgan Asset Management’s Asia Pacific chief, said moving to full ownership was a milestone for the group and that China’s removal of foreign ownership restrictions was an important change. The group had “strong ambitions to strengthen our capabilities in this market”, he added.
International managers expanding in China have typically formed joint ventures with local partners or more recently established wholly foreign-owned entities, or both.
BlackRock, which owns a 16.5 per cent stake in Bank of China Investment Management, part of Bank of China, recently applied to set up a mutual fund business in China.
The China Securities Regulatory Commission said this week it had accepted applications from BlackRock and US investment manager Neuberger Berman, as authorities removed restrictions on fully foreign-owned fund management companies.
JPMorgan Asset Management, which had global assets of just over $2tn at the end of December, had $40bn in assets managed for clients in China three months ago. That figure excludes funds managed for international investors investing in Chinese assets such as China A-shares.
As well as CIFM, it set up a wholly foreign-owned entity, JPMorgan Asset Management (China) Limited, in 2016, and last December announced a third prong to its China strategy after agreeing a strategic partnership with China Merchants Bank.
CIFM was formed in 2004 and had grown to have Rmb150bn ($21bn) in assets as of December.
(Published by Financial Times, April 3, 2020)
____________