JP Morgan Asset Management may start selling funds in China as early as next month, after JP Morgan Chase Bank (China) received approval in late September to market local securities investment funds on the mainland.
China International Fund Management (CIFM), a joint-venture between JP Morgan AM and Shanghai International Trust, will manage some of the funds to be distributed by JP Morgan China.
The firm declined to comment on whether it plans to sell any of its Hong Kong-domiciled fund range to investors in China under the proposed China-Hong Kong mutual recognition scheme when it goes live.
JP Morgan adds to the growing list of foreign banks that have received licences to distribute mutual funds onshore from the China Securities Regulatory Commission.
The seven other banks are Bank of East Asia, Citibank, DBS, Hang Seng Bank, HSBC, Nanyang Commercial Bank, Standard Chartered and United Overseas Bank.
But while these firms are geared towards the retail market, JP Morgan China is focused on the institutional segment, says Travis Spence, head of global liquidity for Asia Pacific at JP Morgan AM.
The firm will focus initially on offering fixed income funds, adds Spence, noting that as the distribution channel grows, so too will its fund range. These will be sold through JP Morgan Global Liquidity China, the funds distribution arm of JPM China.
“We won’t limit ourselves to fixed income, but that’s our focus right now,” he says, because institutional investors tend to prioritise fixed income and short-duration assets. Institutional investors the firm will target include domestic corporations, multinational companies and financial institutions.
“Our business globally is focused on institutional investors,” Spence says, highlighting the firm’s fund distribution capabilities in Australia, Japan and Singapore. Potential for China’s institutional market is enormous, yet the mainland’s fixed income market remains underdeveloped. As a result, investor education is essential, he says.
Mutual fund distribution in China is dominated by the big four banks – Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China account for 70% of the country’s fund sales.
Participants expect local asset managers to welcome foreign participation in onshore mutual fund distribution, due to international players’ well-established systems, product knowledge and experience.
Citibank, Bank of East Asia and Hang Seng Bank have already begun distributing funds in China, with Citi adding JV fund houses Invesco Great Wall and Manulife Teda to its platform; Bank of East Asia partnering with HuaAn Fund Management; and Hang Seng working with HSBC Jintrust Fund Management.