How Can Overseas Asset Managers Navigate the Uncertainty and Flourish in China?
While 2020 has been a year of disruption and distraction, it would be easy to have missed some very significant market-opening developments in China’s capital market to attract overseas investors. FTSE Russell earlier announced to add Chinese government bonds to its World Government Bond Index (WGBI). Local regulator in China has also announced the merger of the qualified foreign institutional investor and renminbi qualified foreign institutional investor schemes into a singular entity. Launched earlier this month, our new report called The Future of Asset Management in China 2020 offers fresh insights on the opportunities for global asset managers in China set against this backdrop.
The report comes hot on the heels of new rules allowing wholly foreign-owned enterprises (WFOEs) to launch onshore retail mutual funds in China and, later, the one scrapping the 49% foreign ownership limit for asset management joint ventures, effectively allowing foreign ownership of up to 100%.
The insights from our report help industry players to understand investor expectations and plan their communications programs accordingly. The over-arching message from the report is that Chinese investors have the money and are willing to pay higher fees for overseas-based asset managers. But – and it’s a big but – the extra expense must be justified.
So how can overseas asset managers navigate the uncertainty and flourish in China?
Understanding of investors’ appetite — Investors in China want a point of difference, be it an original or unique investment strategy, more sophisticated risk management, greater transparency or specialist expertise, such as ESG investing. The message to foreign fund managers is: “Yes, we’ll pay, but prove you’re worth it.”
Communications — The increasing interest of mainland China investors on online and mobile communications means that asset managers need to think through the best ways to reach investors with online tools, both for managing investments and for accessing market information. While the importance of the user experience on their own platforms cannot be overstated, they will need to build a presence wherever the retail investors are located. They will need to find a way into the mobile ecosystems their target investors inhabit.
Lastly, always get prepared and anticipate what comes next — With the ongoing global market uncertainty and changes in regulatory regime, overseas asset managers need to conduct regular stakeholder mapping and scenario planning to get themselves prepared and anticipate the opportunities and challenges ahead of them.
A few overseas asset managers have already made inroads into the booming mainland asset management market. The potential is limitless if you understand the local lay of the land.