GSAM, Prudential Financial, Samsung slump in China ranking

JP Morgan and UBS still head Z-Ben Advisors’ annual list of the leading foreign fund firms in China. Meanwhile, AllianzGI, Morgan Stanley and Fidelity have leapt into the top 10.
GSAM, Prudential Financial, Samsung slump in China ranking

Fierce competition and rapid evolution in China’s funds industry has led to big shifts in Z-Ben Advisors’ second annual ranking of the top foreign asset managers in China.

Prudential Financial, Goldman Sachs and Samsung AM all slipped sharply down the list to exit the top 25 (click on figure 1, right). Others to suffer a similar fate – despite posting higher scores this year ­– were DBS, BMO, Sumitomo Mitsui and Eastspring.

  Figure 1, click for full view

At the other end of the spectrum, however, JP Morgan and UBS remained first and second, respectively, with the former strongly extending its lead. HSBC moved into third spot from sixth, replacing BNP Paribas, which slumped to 11th. Rival French firm Societe Generale also dropped heavily.

Firms posting big gains included Allianz Global Investors, Morgan Stanley and Fidelity, which all entered the top 10. Morgan Stanley saw the biggest percentage increase in terms of its score – almost doubling last year’s figure (see figure 2 below). Generali and AllianzGI came next.

Meanwhile, Asian firms largely struggled to keep pace, with Nikko AM and Value Partners – like DBS and Samsung ­– slipping down the ranks. The one bright regional spot was Hang Seng Investment Management, which entered the top 25 this year.

Rising competition

The results vindicate concerns among domestic Chinese fund houses that global players are set to mount a stern challenge in the onshore business. 

  Figure 2, click for full view

Z-Ben said in the report: “When competitors are improving their China strategies, you have to keep up the pace, or else you’ll fall behind. This was the case for seven of last year’s top 25.” Even some firms that improved their scores last year slid down the ranking, overtaken by stronger-performing rivals.

Z-Ben added that global managers must have a well-diversified and fluid China strategy that can evolve in response to rapid regulatory shifts and inconsistent client demand.

Industry evolution

The mainland investment industry is evolving fast, and asset managers are having to work hard to keep up.

Last year saw eight asset managers set up onshore wholly foreign-owned entities, with the aim of being able to manage mainland money onshore, bringing the total to have done so to 14, noted Z-Ben.

Beijing also further opened its $9.3 trillion interbank bond market to global investors, and fund houses have been positioning themselves for entry.

Hence, although outbound flows from the mainland have been restricted in the past couple of years, there are more channels than ever for inbound investment. This is a major shift from 2015, noted Z-Ben.

Ranking methodology

Z-Ben first published the China ranking last year. It uses a benchmark to assess three business lines for global fund managers – namely, onshore (50%), inbound (30%) and outbound (20%). They are weighted in order of their importance as opportunities in China, with outbound assigned the lowest figure due to the high level of competition.

The methodology assesses 36 quantitative and qualitative factors and includes fund house data as of end-2016. The survey covers more than 100 firms.

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