Singapore's United Overseas Bank (UOB) and Germany's Allianz Group have decided to team up to enter the mainland China pensions and fund management industry and are now looking for a local partner to join them. The two banks have signed a memorandum of understanding to form a 50:50 joint-venture, though detailed plans are yet to be worked out.
Chin-kong Tan, business development director with UOB Asset Management, says UOB will play a major role in the investment process and provide back office support in the venture, while Allianz Asset Management will have significant input on product development.
According to Tan, there are about 10 fund managers and 20 securities companies in the whole Chinese market. Some of these have, however, already signed agreements in recent weeks with other foreign fund managers such as State Street Global Advisors, Schroders Investment Management and JF Funds Management.
Agnes Ting, regional business development director with Allianz in Singapore, says the companies' financial commitments to the new venture will depend on the business scope of the mainland manager, where a full-blown asset management company is expected to cost more than a manager with limited asset classes under management.
"We are open and flexible about the nature of the business that our potential joint venture partner is engaged in," says Ting, adding that the main criteria will be for the manager to show a "commitment to the business" and the ability to add value to the joint-venture.
"While UOB and Allianz are bringing the global investment expertise to the business, we hope our mainland partner can add value to areas such as local distribution as well as having a good understanding of the local market, including the regulatory environment," she says.
The Chinese government has announced recently foreign fund managers will be allowed to enter the country's investment fund market in the form of a joint venture with local managers where the foreign partners are restricted to owning a maximum stake of 49% after three years. Solid regulatory changes, however, are yet to be made.
The joint-venture deal was initiated by UOB a few months ago. Tan says Allianz, with its expertise in fixed income products, is a good strategic fit for the Singapore manager, whose strength lies in equities investments.