China’s Taikang Asset Management, the investment arm of Taikang Insurance Group, is diversifying its mutual fund business, with a focus on passive investment capabilities, according to the top executive of its Hong Kong unit.
And as a signatory to the United Nations-supported Principles for Responsible Investment, the company is also putting more emphasis on sustainable investing, Jack Chen, chief executive officer of Taikang Asset Management (Hong Kong), says in an interview with Asia Asset Management.
He says Taikang’s total assets expanded at a compound annual growth rate of around 19% over the past five years to 2.2 trillion RMB (US$338.8 billion) as of December 2020.
Although investments for its parent insurance company remains the major source of income, he says the share of third-party business grew more than three-fold to 56.6% as of December 2020 from 17% in 2012. The third-party business includes asset management for other institutional investors, mutual funds, and wealth management for high-net-worth individuals.
Chen says Taikang has developed a versatile product mix, including fund of funds, money market funds, and core funds.
“We’re also building our passive investment capabilities,” he says. Apart from launching ETF mutual funds, the company is working with index provider MSCI Inc. to develop index products such as China ETFs for internally-managed insurance assets.
ETFs have been gaining traction among Chinese investors because of their transparent structure and low fees. China’s ETF assets jumped over four-fold from 2016 to 853 billion RMB as of March 2021, according to data from Shanghai-based investment consultancy Z-Ben Advisors.
As for sustainable investing, Chen says Taikang is adopting multi-pronged strategies to incorporate environmental, social and governance factors into its investment processes. For example, it has established a dedicated ESG committee which focuses on setting investment strategy and development goals and supervising ESG investment.
Chen expects China’s mutual fund industry to become more competitive, especially since Beijing has allowed several international fund houses, including BlackRock Inc., the world’s largest asset manager, to launch mutual funds this year.
“The market opening up will be beneficial for the industry…Foreign fund managers can introduce more overseas experience to the onshore market, and the competition with foreign firms will help local players improve their product innovation,” he says.
