Australia’s AMP Capital is in the process of setting up a joint-venture with China’s largest life insurance company, China Life.
The JV marks the first time a foreign fund house joins forces with a Chinese insurance company, and represents the latest partnership between an offshore manager and a Chinese firm, following the State Street Global Advisors and Zhongrong International Trust JV earlier in June and the Taiwanese mutual fund house Yuanta Securities Investment Trust/China Resources partnership in January, among others.
Assuming a “full-throttle push by China Life, continued support from the China Securities Regulatory Commission” and no major delays in receiving the operating licence, China Life-AMP could be “fully operational by the end of the year”, Shanghai-based consultant Z-Ben Advisors tells AsianInvestor.
The firm, to be called China Life AMP Fund Management Company according to the State Administration for Industry and Commerce website, will likely open doors for the Australian fund house as the insurance company will offer a new means of distribution from the typical channels offered by Chinese banks, argues Z-Ben.
Up until now, foreign fund managers seeking to set up an office on the mainland have partnered with Chinese banks, securities firms or trust companies. Through these partnerships, the funds are dispensed through banks’ distribution platforms, which are becoming increasingly crowded. (The big four - Bank of China, Agricultural Bank of China, the Industrial and Commercial Bank of China and China Construction Bank - account for 70% of fund sales into the mainland.)
As such, insurers will be an appealing alternative, as they have “huge sales forces with both retail and institutional investors, long-term relationships with their clients and extensive client data”, notes Lillian Zhu, senior analyst in Z-Ben.
At the end of 2012, China Life had a total sales force of 693,000 individual agents with their net premiums totalling Rmb322 billion ($52.4 billion).
After a new investment fund law came into effect in June, Chinese insurance companies can partake in running mutual funds, provided they apply for the appropriate licence with the China Securities Regulatory Commission.
Insurance companies reportedly starting their own in-house asset management operations include Ping An, The People's Insurance Company Group of China, Taikang and Hutai, while Z-Ben anticipates insurers China Pacific, Anbang, Taiping, Sino-Life, China Re, Union Life, New China, Sunshine and Minsheng may be open to partnering with foreign fund houses in the near future.
AMP and China Life have been working together for eight years – after AMP received its qualified foreign institutional investor license in 2006, China Life acted as its QFII advisor. And in 2009, they signed an agreement to form an asset management division, with market players speculating that a JV was only a matter of time.
An AMP spokesman tells AsianInvestor that both firms have been “actively engaged in technical cooperation in sharing investment expertise and experience" since 2009 but declined to comment on details of the latest venture.