China Asset Management is no longer the undisputed top dog in the mainland funds industry in terms of assets under management – but it was the most profitable last year.
Thanks to the runaway success of its internet finance-related money market fund, Tianjin-based Tianhong Asset Management has posted swift recent AUM growth to overtake ChinaAMC.
Tianhong’s assets nearly trebled in the first quarter, to Rmb553 billion from Rmb194 billion, according to Haitong Securities. It has usurped ChinaAMC as the biggest mainland fund house by AUM, despite the latter’s rising 53% to Rmb348 billion from Rmb228 billion in the same period.
The two firms are now way out in front in this respect, with ChinaAMC now boasting almost double the AUM of its closest rival. China Southern, ICBC Credit Suisse and Harvest rank third to fifth, with AUM ranging from Rmb191.7 billion to Rmb155.8 billion.
Tianhong’s success is based on its move to attach its money market fund to Yu’e Bao (‘leftover treasure’), an investment service provided by Alipay, which facilitates the payment transactions of e-commerce website Taobao.
ChinaAMC has also partnered with internet giants – Baidu and Tencent – to launch internet finance products. ChinaAMC Caifubao (‘wealth treasure’) had an AUM of Rmb82 billion as of March 31.
But profitability statistics tell a different story. ChinaAMC was the most profitable mainland fund house last year, posting net income of Rmb971 million on AUM of Rmb228 billion as of end-2013, according to consultancy Howbuy. The Shanghai-based firm analysed 30 shareholders’ annual reports to obtain this information.
Tianhong’s Rmb11 million of profits on Rmb194 billion in AUM put it way down the list at 25th. E Fund, China Southern, GF and Bosera ranked second to fifth, with profit levels ranging from Rmb614 million to Rmb425 million in that order.
These differences are mainly down to business mix. Fund houses with expertise in equity tend to be more profitable as they charge much higher management fees. The fee for money market funds is usually 0.3%, while for hybrid equity funds it is 1.5%, according to Howbuy.
ChinaAMC received Rmb2.4 billion in management fees last year, with 74.5% coming from hybrid equity funds. More than 60% of the management fees at the 10 most profitable mainland houses – apart from ICBC Credit Suisse – came from hybrid equity funds.
Four of the 30 fund firms surveyed suffered losses last year: Caitong, Founder Fubon, Gfund and Lord Abbett China. The latter, for example, took in management fees of Rmb502 million, but recorded a loss of Rmb9.7 million.