Credit: Kevin Dooley, Creative Commons
China’s asset management industry is undergoing explosive growth. With its economy and export market humming, the stock market soaring, and household wealth expanding, the nation’s fund management companies now have more than $2 trillion in assets under management, up from about $1.3 billion in 1998, when the government first allowed six firms to begin building the industry.
By 2025, the size of China’s fund management business could double, according to the Boston Consulting Group (BCG). And with Beijing liberalizing its financial markets and loosening restrictions on foreign financial firms doing business here, the race is now on to capture share in the world’s fastest growing market.
Although Beijing’s relations with Washington have soured during the past four years, over human rights, Covid-19 and economic sanctions, China has courted Wall Street and global financial firms with promises of greater access and more control over their local operations. Firms like Black Rock and Fidelity have won new licenses to operate in China or chosen to expand their presence. Last April, regulators even scrapped existing rules and allowed foreign firms to fully own their China operations.
This week in The Wire, we look at the biggest players in a market that now has 1.7 million high net worth individuals (those having at least $850,000 to invest), according to the BCG, ranking China second in the world, behind only the United States.
The World in Assets
Data: Willis Towers Watson’s Thinking Ahead Institute and P&I
China is a relatively new player in the asset management market. According to BCG, China had just 2 percent of the world’s share of assets under management (AuM) in 2007. By 2019, it had reached $7.3 trillion in AuM — more than 8 percent. Still, the U.S. and its allies dominate the world of asset management. 1A report from the World Economic Forum and management consulting firm Oliver Wyman put China’s AuM around $16 trillion at the end of 2019, factoring in “quasi” investment management like securities and futures asset management.
The world’s largest asset managers can overwhelmingly be found in the United States. Over a third — or 184 of the top 500 firms — are based in the U.S., including top ranked Black Rock, which manages nearly $8 trillion. There are 29 firms on the list that are headquartered in mainland China and Hong Kong.
China’s Biggest Firms
Since the fund management business was only introduced to China in 1998, its players are relatively small and often operate in joint ventures with foreign fund management companies. As a result, the biggest players tend to be associated with the country’s big state-run banks or brokerage firms, such as the Bank of China and China Construction Bank.
With foreign firms now allowed to own their own operations, they could establish wholly-owned entities here, but analysts expect many global firms to continue to tie up in some way with state firms, since they have access to most of the nation’s money and could also help with government relations.
Below are the 10 largest China-based asset managers as of the end of 2019.
Data: Willis Towers Watson’s Thinking Ahead Institute and P&I, public filings, company websites
The PineBridge Joint Venture
One of the country’s biggest fund management firms is Huatai-PineBridge, which in September 2020 had $21 billion in asset under management. The origins of Huatai-PineBridge can be traced back to U.S. financial services giant American International Group (AIG). The firm was formed by AIG and the Chinese brokerage firm Huatai Securities in 2004, with each taking a 49-percent stake in the new asset manager.2The firm was originally called AIG-Huatai PineBridge spun out of AIG’s asset management arm, including the Shanghai-based joint venture, in 2010.
Although PineBridge — which has $110 billion in AuM — is headquartered in New York, the firm is now owned by Hong Kong-based Pacific Century Group and more than half of the firm’s assets are from Asia.
Huatai Securities is one of China’s largest securities and asset management firms and based in the city of Nanjing. Huatai is a publicly traded company with multiple listings — in Shanghai, Hong Kong and the London Stock Exchange. In 2015, for instance, the firm raised $4.5-billion in its Hong Kong IPO. Huatai also operates a U.S. subsidiary, based in Hudson Yards in New York City, and it holds a minority stake in another major Chinese asset manager, China Southern Asset Management.
Below is the firm’s corporate ownership structure.
Hannah Reale is a staff writer with The Wire. Previously, she reported for the New England Center for Investigative Reporting, The West Side Rag, and her college newspaper, The Wesleyan Argus. @hannahereale
