Australian fund house AMP Capital could be selling its range of equity, fixed income and multi-asset mutual funds to Chinese investors by February through its new joint-venture with China’s largest insurance company.
AMP will have a 15% stake in the Bejing-based JV, China Life AMP Management, with China Life controllling the remainder. Pending approval from the China Securities Regulatory Commission (CSRC), the JV will begin operations within the next six months, says Anthony Fasso, international CEO and head of global clients for AMP Capital, which oversees A$131 billion ($117.9 billion) in AUM.
Eventually, China Life AMP may consider multiple avenues to invest in the mainland, such as through the qualified foreign institutional investor (QFII) programme, although there are no firm plans at the moment, Fasso tells AsianInvestor.
The firms are focused on receiving authorisation from the CSRC to begin operations in Beijing, he adds.
At the moment, foreign financial institutions can only acquire up to 49% of a JV on the mainland. However, under proposed regulations by the Closer Economic Partnership Arrangement, foreign firms could own over 50% of a JV, allowing them to take a controlling stake.
If passed, this could have a significant impact for firms such as AMP. The firm declined to elaborate on potentially increasing stakes in the future.
“It’s been talked about for some time across many industries but I haven’t seen an update on it,” says Fasso. “We’re happy with the stake we have with the right partner.”
This JV marks the first time a foreign fund house will have partnered a Chinese insurance firm, and follows a new law coming into effect in June allowing mainland insurers to run and sell mutual funds.
Meanwhile, it offer AMP Capital a different means of distribution from the typical channels offered by Chinese banks.
Foreign fund houses seeking to set up an office on the mainland previously partnered with Chinese banks, securities firms or trust companies. The funds are dispensed through the banks’ platforms, which are becoming increasingly crowded.
The big four – Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China and China Construction Bank – account for 70% of fund sales on the mainland.
Insurers, which have large sales forces with both retail and institutional investors, long-term relationships with their clients and extensive data, are an appealing alternative.
“Our mutual funds are primarily aimed at retail investors, so historically they’ve been sold via bank channels,” Fasso says, adding that China Life, with one of the largest distribution platforms in the world, will “open up a broader geographic footprint” for AMP Capital.
“[Chinese insurers] have never sold mutual funds before, so it’s going to take time [before it takes off],” he notes. “But this is a very exciting platform to be involved in.
“Chinese investors are still becoming used to investing in mutual funds. There’s still low penetration. But as they become more sophisticated, they are looking for more choice, particularly around fixed income, equities and multi-asset funds,” Fasso says.
AMP and China Life executives are now working on staffing up the firm’s office in Beijing with executives in sales and marketing, client services, registry and record-keeping, compliance, risk management, finance, operations and regulatory issues.
Once the office is set up with staff later this year, CSRC will do an inspection and then award full authorisation.