China Managers to Dominate as Funds Set to Swell to $17 Trillion
China Managers to Dominate as Funds Set to Swell to $17 Trillion
(Bloomberg) -- China’s asset-management industry is set to expand five-fold to $17 trillion by 2030, beating growth in other markets and benefiting local money managers.
Assets managed by Chinese managers may overtake the U.K.’s $3.8 trillion as early as 2019, according to a report by Casey Quirk released Tuesday. The biggest winners will be domestic firms, with foreign institutions getting just 6 percent of the money pile, according to the report.
“China is the only large, multi-trillion dollar market that has seen net new flows in excess of 30 percent per year,” the report said. “The pronounced Chinese bias for domestic asset classes favor local firms” whose “sustained market presence, entrenched distributor relationships and extensive brand-building efforts all add up to a clear advantage which foreign firms will have trouble replicating.”
That may be a reality check for firms looking to China as a rare bright spot as more mature markets in North America, Europe and Japan slow. Foreign firms including BlackRock Inc. and Fidelity International have been trying to tap the country’s growing asset management market.
The Chinese market was worth $2.8 trillion in 2016, behind the U.S. at $33.4 trillion and the U.K’s $3.8 trillion, the consulting unit of Deloitte Touche Tohmatsu Ltd. said in the report. Growing personal wealth and low returns on bank deposits will encourage Chinese investors to allocate more to asset managers, according to the report.
Casey Quirk expects the Chinese industry to attract $8.5 trillion of new assets between now and 2030, accounting for almost half of net inflows to the global industry.
The industry’s share of national wealth in the world’s second-largest economy will rise to 10 percent by 2030, from 4 percent now, putting it on par with where the U.S. was in 1990, the report said.
Much of the growth will be driven by individuals in the “mass affluent” and high net-worth categories, alongside pension and insurance money, Casey Quirk said.
“Perhaps to make up for a late start, China’s asset managers have blossomed and evolved in a manic and seemingly haphazard fashion,” it said. “A cacophonous universe of mutual funds, trusts, pension funds, private funds, vaguely defined ‘wealth management products’ and mobile-only money market funds try to out-do each other, or at least copy the latest hot sellers.”
Investors will become more discriminating as the market matures, the report said. Dominant domestic firms, top-10 global managers, pan-Asia managers expert in illiquid assets, those with an edge in serving retail and wealthy individual clients, and technology-driven firms may win out, it said.
To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net.
To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Peter Vercoe
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