Asset managers are increasingly looking to China and other Asian markets to boost their client base, with more than a third of inflows coming from the region.
China is the most fruitful of these countries. It accounts for 40 per cent of emerging market assets and its share is predicted to grow from $5.3tn to $9tn by 2023, according to Morgan Stanley, the investment bank, and Oliver Wyman, a management consultancy.
Larry Fink, chief executive of BlackRock, the world’s biggest asset manager, wrote to shareholders last week and reiterated that China was central to the group’s growth plans.
China is tipped to become the world’s second-largest investment market in two years, behind only the US.
Developed markets still account for 85 per cent of global assets under management, but Morgan Stanley and Oliver Wyman argue that global managers can increase their presence in emerging markets by tailoring their product and distribution strategies for local needs.
If foreign asset managers were to account for 10 per cent of market share in China by 2023 — up from 5 per cent today — that would equate to $500bn of new assets for them to manage, resulting in a fourfold increase in revenues to $4bn.
Historically China has been closed to international managers, in contrast to the Middle East, where the bulk of assets are in large sovereign wealth funds with a globally diverse investment outlook.
A more open Chinese market will make it possible for foreign asset managers to own majority stakes in local companies, as well as in China’s ecommerce industry.
Conversely, Chinese investors are interested in adding geographical diversity to their portfolios, helped by relaxed regulations. This is an advantage for global asset managers, especially those focused on equities and private assets.
Mr Fink told the Financial Times that BlackRock was “very engaged” with Chinese regulators as it tried to take control of a local investment manager. “If anything the Chinese are looking for greater participation of global firms in their asset management space because they also have a growing retirement crisis,” he said.
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