Australian house AMP Capital admits fundraising for a first product launched via its China joint venture has exceeded expectations, riding red-hot popularity for money-market funds.
The venture, which joined forces with China Life last July, only started promoting its money-market fund this month, but already it has raised A$2.2 billion ($1.9 billion).
AMP says it will continue marketing the strategy in the coming months.
China’s money-market funds industry saw its AUM more than double in the second half of last year to Rmb737 billion, from Rmb302 billion as of June 30, according to Fitch Ratings.
The agency attributes this jump to surging retail demand, online payment options, new fund launches and higher interest rates, although it does expect volatility in the asset class this year.
MMFs currently offer 6-7% in interest in China, compared with 0.35% for bank deposits. That has led to a flood of money into the asset class, and a drain on bank deposits.
Anthony Fasso, international CEO and head of global clients for AMP Capital, says liquidity means these products appeal to a broad range of investors, including insurers, corporates, high-net-worth and retail.
“The benefit of this kind of fund is that anyone can buy them,” he says. “China Life, being a very large organisation, has lots of relationships with corporates and institutions around China. A reasonable amount of money was raised directly by our institutional sales team."
When asked if the joint venture would consider selling funds online, Fasso notes “it’s a hot topic at the moment, but that’s not our intention in the short term”. But never say never, he adds. “Things move very quickly in China.”
However, there are expectations that tight central bank liquidity coupled with the forthcoming spring festival in China – when retail account holders typically pull out large sums to pay for travel and presents – will lead to mass withdrawals.
Fitch also notes there are long-term risks to consider: authorities liberalising the quasi-fixed deposit rate regime will have an impact on AUM trends and could slow growth in the retail segment if bank deposits offer more competitive rates.
But Fasso counters that money-market funds generally provide more attractive returns to bank deposits, while the breadth of their appeal means that even if one investor segment redeems, another will retain allocations.
On distribution, Fasso says the China Life AMP JV partnered a number of mainland banks – the lead distributor is ICBC – and also goes direct via its in-house sales team.
“The amount already raised exceeded our expectation and we’ll continue to market the fund,” a AMP Capital spokeswoman says, adding that JV has additional fixed income and equity funds in the pipeline, although she declined to offer specifics.
The China Life AMP Money Market Fund invests in liquid short-term bonds and cash deposits. Its investment minimum is Rmb1,000.
AsianInvestor reported on AMP Capital and China’s largest life insurance company forming the joint venture last year. AMP has a 15% stake in the Beijing-based JV, with China Life controlling the remainder.