Société Générale Asset Management is to transfer its 49% stake in its Chinese fund-management joint venture, Fortune SGAM, to SG Corporate and Investment Banking (SGCIB) subsidiary Lyxor Asset Management.

The merger of Credit Agricole Asset Management (CAAM) and SGAM's asset-management properties in Europe meant Fortune SGAM did not comply with China Securities Regulatory Commission (CSRC) ownership rules. The regulations limit any foreign asset manager's China operation to one entity, and both CAAM and SGAM already have mutual-fund operations inside China.

SGAM chose to transfer the stake instead of liquidating one of its two local entities, as BNP Paribas has done with its non-compliant stakes. The ABN Amro Teda JV eventually ended up in the hands of Manulife late last year.

The CAAM-SGAM merger, which created Amundi Asset Management, was finalised on April 1. Neither Lyxor nor its parent company, SGCIB, has any direct affiliation with Amundi, so the transfer allows SGAM to effectively divest itself from Fortune SGAM, theoretically affording compliance for both CAAM and SGAM, says Shanghai-based consultancy Z-Ben Advisors.

"We say 'theoretically' because we are yet unsure of how strictly regulators will interpret their own rules," adds Z-Ben. "Although the share transfer removes SGAM from any affiliation with Fortune SGAM, the firm's parent, Société Générale Group, still retains an indirect 8.33% stake in ABC-CA through SGAM's 25% participation in Amundi."

Since neither ABC-CA nor Fortune SGAM have any regulatory restrictions, such as suspension of new product launches -- a tool CSRC regularly employs to motivate firms to comply with its rules -- Z-Ben says it is "optimistic" that the share transfer may have satisfied the regulators.   

This will be the first time Paris-based Lyxor will operate in the mainland, although the firm has a Hong Kong-domiciled index fund tracking A-shares, says Z-Ben, which advised CAAM and SGAM on the ownership non-compliance.

That said, the firm may not be a complete stranger to Fortune SGAM, adds Z-Ben. Given Lyxor's strong background in index and exchange-traded funds, Z-Ben believes the asset manager has played a supporting role in developing the Chinese JV's QDII index fund, the Fortune SGAM Topic 30 Index product. 

Lyxor operates mainly in Europe and specialises in structured products, alternative and index-tracker funds.