US-based Principal Financial Group (PFG) is positioning its Chinese joint venture company, CCB Principal Asset Management (CCBPAM), as the key vehicle to grow its business in the Mainland.
CCBPAM was formed by PFG, China Construction Bank (CCB) and Beijing-based investment firm China Huadian Capital Holdings (China Huadian) in 2005.
According to Thomas Cheong, president of North Asia at PSG, CCBPAM has made significant progress in AUM growth over the past few years.
“China is now the fourth largest market for PFG after the US, Brazil and Chile,” Mr. Cheong tells Asia Asset Management in an exclusive interview
Mr. Cheong, who joined PFG in 2015 as vice president and head of North Asia, was recently appointed to his new position, in which he will lead the development of the company’s retail pension and asset management businesses in China and Hong Kong.
“With CCB’s nationwide network and PSG’s investment capability, CCBPAM has become the fourth largest asset manager in China with AUM of about 449.3 billion RMB [US$67.93 billion] at the end of September,” he says.
Although several wholly foreign owned enterprises (WFOEs) of overseas asset managers recently received private fund manager (PFM) licences to operate onshore private fund businesses, PFG is not in a hurry to jump at this opportunity, according to Mr. Cheong.
“PFG established its WFOE in 2016, but its main role is to coordinate the projects under the strategic partnership with CCB,” he says. “Applying for the PFM licence is currently not the priority for us.”
“Unlike some foreign asset managers, we’re in a different position in that PFG has developed a very good relationship with CCB. As such, we’d rather focus on enhancing this partnership instead of forming a private equity fund in the current stage,” he adds.
But Mr. Cheong says only half of CCBPAM’s fund distribution channel comes from the CCB banking network.
“CCBPAM has diversified its sales network to other banks and financial institutions because we don't want to excessively rely on CCB resources,” he notes.
As far as the industry landscape is concerned, although China’s asset management market is still dominated by money market funds (MMFs), Mr. Cheong expects the overconcentration to improve with the recent regulatory requirement for MMF managers to hold more risk reserves.
He believes the measure will deter asset managers from boosting their MMF business aggressively. “It will help to stop the growth of MMFs where the liquidity risk has been very high,” he says.