Wholly foreign owned enterprises (WFOEs) in China are expected to undergo a smoother registration process with the Asset Management Association of China (AMAC) now that more foreign asset management firms are receiving onshore private fund manager status, according to Boston-based fund consultant Cerulli Associates.
WFOEs, which are the investment vehicles of foreign asset managers in China, are required to register as private securities fund managers with the AMAC –the self-regulatory body for the Mainland’s mutual fund industry– in order to launch onshore private fund products.
Currently, the registration process depends on an applicant’s business track record in China, and can be lengthy.
“We understand that WFOEs’ registration with the AMAC takes time, and managers will mostly have their product strategies ready in advance,” Miao Hui, a senior analyst at Cerulli Associates, says in a report on October 11.
“However, the registration process will be smoother for managers, given the four successful cases.”
Fidelity Investment Management became the first WFOE in China to register with the AMAC in January, six months after Mainland regulators allowed foreign managers to operate onshore private fund business.
AMAC has since also given the nod to UBS Asset Management, Man Group, and Fullerton Fund Management.
The AMAC did not respond to questions from Asia Asset Management (AAM) about Ms. Hui’s report.
Ms. Hui tells AAM that more foreign fund managers are expected to register with the AMAC.
“They could come in batches. We understand managers need a lot of time to make all things done, but once they register with the AMAC, they must launch the first product within six months,” she says.
She expects some WFOEs to start by launching traditional bond or equity funds, while others may plan on multi-strategy or quantitative strategy products in order to be the first to draw investors’ attention.
According to figures from Cerulli Associates, AUM in China’s private fund market grew 20% over the first half of 2017 to reach 9.5 trillion RMB (US$1.44 trillion), outperforming the 12% growth in the AUM of the country’s mutual funds over the same period.
“It is therefore hardly surprising to see foreign managers queueing to enter the [WFOE] market,” Ms. Hui says in her report, noting that the number of WFOE licence holders has expanded to 22 as of September 2017 since the programme was launched in 2015.
China’s pension sector is also another promising market for foreign asset managers as the National Social Security Fund, the Mainland’s supplementary pension fund, is selecting new asset managers, and the China Securities Regulatory Commission is seeking public opinion on pension-type mutual funds, according to Ms. Hui.
“Many foreign asset managers are eyeing the pension fund space to build their market share in China,” she says.
