Taiping-Ashmore deal underlines China mutual fund challenges

Having acquired joint-venture investment firm Ashmore-CCSC, China's Taiping faces a tough task building scale in the fiercely competitive mainland mutual fund business.
Taiping-Ashmore deal underlines China mutual fund challenges

The recent purchase by Taiping Asset Management of a majority stake in struggling joint venture Ashmore-CCSC Fund Management reflects both the growing proliferation of Chinese insurers entering the mutual fund industry and the challenges they face in doing so.

Taiping AM, part of Shanghai-based Taiping Insurance, bought 32% of the 49% of the JV that was owned by UK asset manager Ashmore, and 34% of China Central Securities’s 51% stake. Each of those two previous owners now holds 17%.

Taiping will be hoping it can build the JV’s scale. Ashmore has found it had to grow the firm since it acquired the 49% stake from rival UK asset manager Aviva Investors. The business only had one mixed-asset mutual fund as of June 30, with Rmb10 million ($1.5 million) in AUM, making it China’s smallest mutual fund house. 

The plan is to rename the JV fund firm Taiping Fund Management, suggesting Ashmore will now act as a financial investor in the firm rather than an active stakeholder.

A spokesperson for Ashmore said Taiping Group coming in as a shareholder would bring “material benefits” in the form of improved access to mainland clients and better support for product launches. Ashmore already has a wholly foreign-owned enterprise, which it set up in Beijing in 2010, but it declined to comment on how it might change its business strategy for China.  

Taiping is not the only mainland insurer entering the mutual funds business. Last month Beijing-based Huatai Insurance gained approval to set up a mutual fund company, and Taikang Life set up a mutual fund division last year. China Life, the mainland’s largest life insurer, was the first mover, having launched the country’s first insurer-backed mutual fund house jointly with Australian firm AMP Capital in 2013.

A number of firms – in addition to Taiping – have taken the acquisition route to getting a licence rather than seeking approval from the China Securities Regulatory Commission (CSRC). Shanghai-based China Pacific Insurance bought a stake in GTJA-Allianz Funds, a JV between Guotai Junan Securities and German financial services group Allianz. Meanwhile, Anbang Life is awaiting CSRC approval to set up a mutual fund firm after applying for a licence in April.

Ivan Shi, research director at Z-Ben Advisors, said insurers could evolve into financial conglomerates after obtaining mutual fund licences, as such businesses can provide stable profits if they achieve sufficient scale. 

Insurance companies must first obtain approval from the China Insurance Regulatory Commission, before being granted a mutual fund licence by the CSRC.

Taiping did not respond to requests for comment by press time. 

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