Hongta AMC has become China’s 72nd fund management firm, in a move that underscores how the shareholding structure of such companies is becoming more diversified.
Based in Shenzhen, Hongta has registered capital of Rmb200 million and three shareholders: Hongta Securities (49%), venture capital firm Shenzhen Capital Group (26%) and Huayuan Group (25%), which is a conglomerate focused on property development.
It is the first time a listed property developer will have held such a significant stake in a Chinese fund management company.
Ren Zhiqiang, chairman of Huayuan Property, is an outspoken tycoon who has been nicknamed “Cannon Ren” by netizens for making controversial comments, such as “Chinese people are too rich, and houses are too cheap”.
Looking around the industry at other shareholding structures, Dalian Shide, another conglomerate involved in property development, has just a 1% shareholding in Invesco Great Wall FMC; while Suzhou Industrial Park Land Management Company, which has a 15% stake in Sinolink General Asset Management, is more involved in infrastructure than property development.
Traditionally, financial institutions such as securities firms and banks have been the key stakeholders in FMCs. But the new generation of FMCs is far more diversified with both non-financial state-owned companies and privately-held enterprises keen to tap the potential of China’s wealth management sector.
Tebon FMC, which was only established this March, has state-owned manufacturing group Xizi UHC as a 31% shareholder, along with Zhejiang Native Produce & Animal By-products Import and Export Group (20%) and Tebon Securities (49%).
ChangAn FMC’s minority shareholders, meanwhile, are Shanghai MetersBonwe Fashion and Accessories (33%) and China Southern Industries (18%).
What remains unchanged, though, is that these shareholders will need to be patient for their investment to pay off, given that Chinese mutual fund managers are enduring a tough time.
Industry revenue declined by 7.35% in 2011, while costs – mainly human resources and distribution – have risen steadily over the past three years. The result is that 25% of FMCs didn’t make a profit last year, particularly smaller and new firms.
High turnover has also been a feature of the industry. This month ChangAn FMC announced that its general manager’s (Cao Yang) had exited less than 10 months after the company set up in September last year. Its first equity fund raised just Rmb380 million during the IPO.
Hongta AMC was approved as a fund management company on May 10. It was the China Securities Regulatory Commission’s first approval since it published its application and approvals schedule for new FMCs.
The regulator’s recently appointed chairman, Guo Shuqing, has been making an effort to make the industry more transparent. As a result, it now publishes a list of management firms that are awaiting approval.
Its latest list of pending applications features Yingda, Central China Aviva (JV with Aviva taking 49%), Jiangxin, Donghai, Xiangcai Samsung (JV with Samsung taking 40%), Huaxi Capital (Taiwan’s Capital SITE taking 49%) and China Resources SZITIC Yuanta (Yuanta SITE taking 49%).