Aberdeen Standard deal seen to delay China PFM licence

The newly merged group is the fourth firm to have won a China private fund management licence in the past month and is planning an equity fund.
Aberdeen Standard deal seen to delay China PFM licence

Newly merged Aberdeen Standard Investments has become the eighth foreign firm to win a private fund management (PFM) licence in China, but there is talk that the acquisition deal delayed the approval process—something the fund house denies.

The firm’s wholly foreign-owned enterprise (WFOE), Aberdeen Asset Management (Shanghai), obtained the licence on November 29, which allows it to manage and sell onshore private investment funds to high-net-worth and institutional investors

Aberdeen AM was the first foreign firm to be granted a WFOE licence in China in September 2015 and it is still applying to participate in the qualified domestic limited partnership programme.

Theoretically, Aberdeen AM should have been the first firm to win a PFM licence, but the merger of Aberdeen AM and Standard Life resulted in a delay, Liu Shichen, a product and distribution specialist at Shanghai-based consultancy Z-Ben Advisors, told AsianInvestor.

When asked by AsianInvestor whether this was the case, an Aberdeen Standard spokeswoman said by email that it was not, but did not identify another reason for the delay. She noted that the firm had worked very closely with the regulators on the registration and did not seek short-term results.

Aberdeen AM and Standard Life merged in mid-August to form Scotland-headquartered Standard Life Aberdeen. Aberdeen Standard Investments is its investment management arm, with £583 billion ($758 billion) under management.

The new entity appointed Amy Wang as general manager of its WFOE to lead its onshore China business from September 1, as first reported by AsianInvestor.

A sustainable pace?

Aberdeen AM's approval follows after Invesco, Value Partners and Neuberger Berman secured their licences on November 9. Before them, Fidelity, UBS Asset Management, Fullerton, and Man Group won their approvals in January, July and September.

While four fund houses got their licences in November, Liu said he did not see that momentum being sustained, with 19 investment management WFOEs in China yet to obtain a PFM licence. 

Since WFOEs have to roll out new products within six months of securing a licence, they first have to set up offices and build out teams before registering with the Asset Management Association of China (Amac), and many are just not ready, Liu said.

Aberdeen AM has a small team in Shanghai with full back-office support from Hong Kong, Singapore and the UK. In the coming year, the company plans to expand the team in Shanghai, adding roles across various functions including portfolio management, investment execution and operation, it told AsianInvestor by email.

Amac said in a statement last month that the registration of WFOEs and private securities fund management firms were the fruitful results of Sino-US and Sino-British dialogue and were helping to realise the country’s promise to open up its capital markets. It added that it welcomed more eligible WFOEs trying to secure PFM licences.

Equity fund preferred

Armed with their PFM licences, Aberdeen AM and Fullerton are each planning to launch an equity fund in China, while UBS AM set up an equity fund last month, the three fund houses told AsianInvestor. 

Neuberger Berman is looking to launch a multi-sector fixed income fund, while Fidelity started offering a bond fund to investors in March.

The underlying assets for the private funds will depend on market conditions. When Fidelity sold its bond fund earlier this year the bond market was performing well. At present, the stock market is faring better than the bond market in China so an equity fund is likely to be preferred, Liu said.

The first products launched by licensed foreign-owned private fund managers in China will not necessarily be very large, he added, but each will assuredly strive to build strong track records for them so they can develop their businesses subsequently.

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