Amundi Aims to Double Greater China Assets to $250 Billion

(Bloomberg) -- Amundi SA is seeking to attract as much as $250 billion in assets from the Greater China region, pledging to build a secondary home base in one of the world’s fastest-growing wealth markets.

The Paris-based firm is planning to more than double assets under management in China, Hong Kong and Taiwan by 2025, from its current level of $120 billion, said Zhong Xiaofeng, chairman of Amundi Greater China. Amundi wants to bolster its China footprint by offering more products, hiring staff and working closely with its joint venture partners Agricultural Bank of China Ltd. and Bank of China Ltd.

“We will cultivate China into a second home market for Amundi,” Zhong said in an interview. “A key challenge we need to succeed in is making our JVs in China an example of marrying local conditions and global standards.”

China stands at the heart of Amundi’s expansion in Asia where it wants to increase assets to 500 billion euros ($593 billion) in four years. The region is a key focus for Valerie Baudson, who took over in May as chief executive officer of the $2.1 trillion money manager created by the merger of fund units at Credit Agricole SA and Societe General SA.

Amundi is taking a similar approach as BlackRock Inc. and Goldman Sachs Group Inc. in exploring multiple tracks to break into China’s retail wealth management space, which Deloitte estimates could grow to $3.4 trillion by 2023.

So far, that strategy of sprinkling bets seems to be working. Its joint venture Amundi BOC Wealth Management Co., which was approved by regulators in September, attracted $5 billion of assets in six months and issued more than 50 products. Leveraging Bank of China’s distribution network, Amundi is tapping into clients with lower risk appetites, offering fixed-income or multi-asset investments with small exposures to equity. Amundi owns a 55% stake while BOC Wealth Management holds the rest.

“We made sure our products were able to withstand the volatility of the market and stay above par value,” said Zhong, adding that the company is adopting new techniques to ensure lower volatility and smaller drawdowns in a market notorious for retail churn.

Amundi is also devoting more resources at its other pillar, taking an active approach to working with Agricultural Bank despite only holding about a 33% stake. Set up in 2008, the joint venture has attracted more than $75 billion in assets.

“We are not completely passive,” said Zhong, who is based in Hong Kong and was appointed Greater China chairman last year. “We are also trying to see how we can contribute as a shareholder to the development of the JV.”

Amundi, whose shares have jumped 13% this year, isn’t ruling out other options including setting up a robo-advisory service or a fully-controlled fund entity as BlackRock has done.

“We are open to it,” he said, referring to a fully-owned firm. “We will assess to see if we will need to have additional structures to meet the local demand.”

The ambitions mean extra capital and headcount. Amundi is looking to hire both global and local talent in sales, investment management, marketing, compliance and operations to strengthen its 400-strong team in Greater China.

That said, Zhong wants to build at a tempered pace to ensure new hires are integrated into the company’s culture. “We are not going to grow dramatically,” he said.

Amundi is counting on its synergies with the two Chinese banks to kick start its business for the Greater Bay Area wealth-connect program, a trial expected to be launched soon by Beijing that would allow investments across the border between Hong Kong and China’s southern region.

The company has two to three moderately risked products lined up, focusing on fixed income or a mixture of equities and bonds. “We’re just waiting to push the button” once they get a nod from regulators, said Kerry Ching, CEO of Amundi in Hong Kong.

Hedging Bets

The multi-track approach in China has been adopted by global firms including JMorgan Chase & Co. that are pouring hundreds of millions of dollars into the market.

Part of the reason stems from the country’s segregated regulatory regime. The China Banking and Insurance Regulatory Commission supervises wealth management services such as Amundi’s joint venture with Bank of China, while the securities watchdog oversees mutual funds like its partnership with Agriculture Bank.

Zhong reasons that Amundi’s strategy helps build brand recognition and a distribution network, key to winning over the retail market in China.

“It’s not a waste of energy and capital when you engage yourself in multiple projects,” said Zhong. “The Chinese asset management market is in a state of flux. It’s changing very fast, but still pretty much segregated in terms of regulatory oversight. We do expect convergence going forward.”

Brewing Risks

The expansion isn’t without challenges. Wall Street banks for years have struggled to make profits at their Chinese joint ventures. The competition among the more than 140 mutual fund management companies has been cut-throat. A talent war is brewing and it’s not a business that can be won overnight with local partners.

“Every American company is looking for some form of short cut,” said Peter Alexander, Shanghai-based managing director of Z-Ben Advisors Ltd. “You are not going to achieve the kind of results you think you want to achieve in any short order, meaning in a year or three.”

The intense competition and high costs have deterred companies like Vanguard Group Inc., which made a u-turn in March by scrapping plans to set up a wholly owned fund company to focus on a joint venture robo-advisory platform.

Vanguard serves as a cautionary tale for companies eyeing China’s wealth industry, which is still dominated by local firms. For the mutual fund industry, global players account for about 25% to 30% of the market, after adjusting for their minority stakes, said Jasper Yip, a partner at Oliver Wyman in Hong Kong. Foreign-controlled firms have much less, though their market share may jump to about 10% in five years, Yip said. Using China’s broader definition of asset management, including trusts and insurance products, the foreign group’s share is less than 5%. That could grow to 10% to 15% in a decade, Yip estimates.

U.S. Dispute

China’s spat with the U.S. and the dangers of further decoupling of capital markets is another looming concern. Last week, the Chinese government said it would step up regulatory scrutiny over companies’ foreign listings, sending shock waves among Chinese tech stocks in the U.S.

“This will add a bit of twist, but I don’t think this will completely change the course of the development of the industry,” said Zhong.

©2021 Bloomberg L.P.