Manulife has become the first financial institution to win approval to set up a wholly foreign-owned investment company in Shanghai, and will move its China institutional sales team from Hong Kong to the new unit, said Michael Dommermuth, Asia head of asset management and wealth management.
The fund management arm of the Canadian insurance group plans initially to focus on selling private-market products to mainland asset owners, he told AsianInvestor.
Manulife has beaten other fund houses to the punch in obtaining this licence. Various firms are seeking, or planning to apply for investment management WFOE licences, including Bridgewater Associates, Franklin Templeton, Invesco, UBS Asset Management and Korean firms Hanwha AM and Mirae Asset.
Dommermuth declined to comment on how many staff would man the new unit or when the sales team move would take place, apart from that it would happen as soon as possible. And he could not reveal who would head the new onshore entity and when the firm would put investment staff on the ground, noting that Manulife was finalising the set-up of the new entity.
The other sales staff covering elsewhere in North Asia will remain in Hong Kong, the firm's Asia hub.
The new entity will allow Manulife to deal in outbound investments for the first time in China, tapping domestic asset owners that want to invest in private and public markets overseas. Dommermuth told AsianInvestor that outbound investment flows stood at $900 billion annually and that this figure would expand by $1 trillion by 2030.
Chinese asset owners are seen as keen to invest overseas, but there are currently restrictive capital controls hindering the flow of money offshore, and it is not clear when these will be relaxed. "We think that our private asset capabilities will be of particular appear to Chinese institutions,” he said. Manulife AM has $83 billion of its global $343 billion of AUM in private market assets, he added, and is among the world's largest investors in both timber and farmland.
In other plans for China, Manulife plans to launch an onshore pensions joint venture with a big local institution. The firm believes this market will grow to $6 trillion by 2030, driven by the rapid ageing of China's population, said Dommermuth. The country's pension reserves now stand at less than 10% of national income, he noted, so there is a very significant retirement savings deficit that Beijing needs to address.
The group already had a substantial presence in China and Hong Kong before receiving the new licence. For one thing, Manulife Investment Management Hong Kong runs $40 billion of Asia fixed income assets.
Dommermuth declined to comment on the development of the firm's plans to manage products under the China-Hong Kong mutual recognition of funds (MRF) scheme. He had told AsianInvestor in June 2015 that Manulife AM would build a platform for MRF products.
Asked whether Manulife AM had registered products to invest in the China interbank bond market following the broadening of access last year, Dommermuth said it would “obtain the necessary licences when appropriate” for rolling out different solutions.
The firm already has a fund management JV in Beijing, Manulife Teda, of which it owns 49%. With $9.8 billion in AUM, the JV focuses on selling domestic mutual funds to the local retail market. Dommermuth said Manulife expected the mutual fund market to grow by 15% annually until 2025 from its current $1.3 trillion.
Manulife also owns 51% of an onshore insurance JV, Manulife Sinochem Life Insurance, which has $3.2 billion under management. Having a majority-owned enterprise is one of the key requirements for being awarded an investment company WFOE licence.
Beijing then set out requirements in June 2016 for how WFOEs and Sino-foreign asset management JVs could be registered under the Asset Management Association of China as onshore private fund houses.