Five Communications Imperatives for Overseas Asset Managers Eyeing a China Expansion
Strategic communications are crucial as asset managers compete to gain a foothold in China’s liberalized fund market.
China’s financial sector reforms are gathering pace despite the COVID-19 pandemic. The China Securities Regulatory Commission has just abolished foreign ownership limits for mutual fund managers on April 1, with limits for securities companies set to follow suit on December 1.
Major foreign players with a presence in China have acted swiftly to apply for majority control or full ownership of their China joint ventures. And others are expected to accelerate their market entry strategies. Given the scale of the opportunity, none of this is a surprise.
China is set to become the second-largest asset management hub in the next few years. The liberalization of the asset management space will improve foreign players’ opportunities to tap into the China market, but it has come much quicker than nearly all firms were planning for and obstacles remain.
Gaining a foothold
Foreign firms today account for only a tiny fraction of the mainland’s asset management business. The market is crowded, and local incumbents have trusted reputations, widespread distribution networks and critical local knowledge. Competition for talent, customers and fintech partners is acute.
The situation is even more difficult because of volatility due to macro challenges such as the lingering economic slowdown, trade war tension and the global COVID-19 pandemic.
There is good news in that investors in China are not biased towards local asset managers. A FleishmanHillard survey of Chinese investment professionals, conducted late last year and shared in The Future of Asset Management in China report, found that investors in China prioritize the credibility of the asset manager brand (74%) and investment performance (64%) over any considerations of the brand’s country of origin. While this indicates a more level playing field for foreign firms today, most are little known in China.
Communicating for impact
Foreign asset managers therefore need an effective brand-building strategy that helps them establish their authority and earn the trust of Chinese investors. Well-orchestrated strategic communications and reputation management are vital.
Drawing on the findings from The Future of Asset Management in China survey, here are five communications imperatives for inbound firms preparing to establish a solid foundation for growth in China.
- Communicate differentiated investment strategies: Of those survey respondents who already invest in products from wholly foreign-owned enterprises or foreign-invested joint ventures, 68% said they chose to do so to gain access to unique investment strategies not otherwise available. Foreign players must therefore clearly communicate these strategies alongside evidence of their superior performance (valued by 72% of investors).
- Use multi-channel communications: Similar numbers of survey respondents favoured independent financial advisors (IFAs), financial media, social media and websites for information on funds and investment products. While it can be a challenge to master multiple media channels, none can be ignored in any serious effort to engage mainland investors. The importance of people-to-people relationships and the need for trusted figures when it comes to important investment decisions also need to be taken into account.
- Offer investor education: Some 82% of investment professionals in the survey want firms to offer investor education, while 76% mentioned participating in roadshows and conferences as important. This presents foreign asset managers with a clear way to build brand recognition in key locations through face-to-face interactions with investors.
- Prioritize transparency: Transparency in communicating with clients is the most desirable trait of overseas asset management houses operating in China, with 60% of respondents considering it very important and a further 37% as somewhat important.
- Showcase ESG expertise: More than half of respondents (52%) also identified expertise in environmental, social and governance (ESG) investment strategies as a very important requirement for fund managers, with 94% overall considering it either very or somewhat important. There is huge potential for sophisticated global firms to conquer thought leadership in this space based on their global expertise.
Earning good brand recognition in a market as large and complex as China is a challenge. But foreign asset managers that do so now have the opportunity not only to participate in the domestic retail market but also poisition themselves for success should China’s outbound investment rules be relaxed in the future.