BlackRock, Vanguard Among Fund Giants Flocking to China

(Bloomberg) -- Global asset managers are embracing China’s invitation to do more business in one of the world’s fastest-growing financial markets.

At least six firms, including BlackRock Inc. and Vanguard Group Inc., have told regulators they intend to apply for fully-foreign-owned mutual fund licenses, people familiar with the matter said. In October, the China Securities Regulatory Commission said overseas institutions can apply for total control of onshore ventures starting in 2020: applications for futures firms begin Jan. 1; fund management businesses start April 1.

Fidelity International, Van Eck Associates Corp., Neuberger Berman Group LLC and Schroders Plc have also held talks with regulators, the people said, asking not to be identified because the discussions are private.

Fidelity said in a statement that the company is “actively preparing” to apply for a mutual fund license at a proper time. Neuberger Berman and Vanguard declined to comment. BlackRock, Van Eck and Schroders didn’t immediately reply to requests for comment.

The prospect of unshackled access to Chinese households’ 90 trillion yuan ($12.8 trillion) of investable assets is luring the world’s biggest money managers even as China’s economy slows and its stock market fluctuates amid a trade war with the U.S. China’s mutual fund market, or mass retail market, has ballooned more than sixfold since 2011 to almost 14 trillion yuan.

“Global managers’ response has been quite positive to the policy easing, and we expect more to apply,” said Ren Zhiyi, a Shanghai-based partner at law firm Fangda Partners. “It’s a great opportunity for a market they’re bullish on for the long term.”

Wealthy Clients

BlackRock Chief Executive Officer Larry Fink said in April he’s seeking to make the firm one of China’s leading asset managers as it expands outside the U.S., citing the potential for organic growth as the nation opens up its financial markets.

The company, which owns a minority stake in a fund management joint venture with Bank of China Ltd., launched its first onshore private fund to qualified institutions and high-net-worth individuals last year, after winning a private funds license in 2017.

Vanguard’s Asia CEO Charles Lin said in a July 2018 interview with the Chinese-language Securities Times, when he was China head, that the enormous size and significant potential of the Chinese market has led to optimism that the firm’s assets under management in China could grow to $5 trillion one day.

Foreign firms have formed 44 fund management joint ventures with Chinese partners, all holding stakes smaller than 50% except JPMorgan Chase & Co., which earlier this year boosted its ownership above that level pending regulatory approval. Twenty-two global money managers, including Fidelity and Neuberger Berman, have also started private fund businesses in China over the past few years.

To contact Bloomberg News staff for this story: Haze Fan in Beijing at hfan40@bloomberg.net;Zhang Dingmin in Beijing at dzhang14@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net;Emma O'Brien at eobrien6@bloomberg.net

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With assistance from Bloomberg