Bo Xilai case ensnares Ag Bank's funds JV
Agricultural Bank of China (ABC) has seconded Diao Qinyi to its joint-venture fund management company, ABC-CA, as its new chairman to replace Yang Kun, who has been detained and is being investigated by China’s governmental departments, according to a filing yesterday.
There is no result of the investigation announced yet, but Chinese media widely speculates that his case involves loan agreements ABC signed with a property developer in Beijing and probes into Dalian Shide Group, which has a connection with Bo Xilai, China’s ousted Politburo member.
ABC-CA Fund Management is a JV established with ABC as major shareholder (51.67% of equity) and Credit Agricole and Aluminum Corporation of China as minority shareholders, holding 33.33% and 15% respectively.
Diao's appointment is effective as of August 9. Yang was vice-president of ABC until the bank confirmed state authorities had detained him on unspecified charges on May 30.
On July 13 he resigned from his positions at ABC as executive director and vice-president, as well as relinquished his board membership. Technically he remains chairman of ABC's financial leasing company.
Yang worked at ABC for 29 years and is the highest ranking executive to be investigated for some kind of misconduct since the bank went public in 2010.
Diao, the new chairman of ABC-CA, is also a veteran at ABC, having worked there for more than 30 years, and currently serves as the bank's CIO.
“Usually daily operations of a fund management company are run by the general manager; however, given that ABC is the controlling shareholder, the chairman would have a strong say in the FMC’s strategic planning,” says Liu Yiqian, fund analyst at Shanghai Securities.
Moreover, because ABC is one of the big five state-owned banks in China, with an extensive distribution network, its support is critical to the fund JV's growth.
Established in 2008, ABC-CA FMC missed the bull market in 2006 and 2007 and has striven to survive in a volatile market. Liu notes, “As a relative newcomer, its fund performance has been flat, but it has recorded quite rapid growth in terms of size, thanks to the support of ABC.”
As of June 30, ABC-CA’s total AUM had reached Rmb16.1 billion, up 21% compared with the end of the first quarter, ranking it 37th out of 68 FMCs. It manages 14 mutual funds and has two equity funds in the pipeline.
Its general manager, Xu Hongbo, also came from ABC. He has been with the JV since December 2005 when it was still at preparation stage. Prior to that, he was the vice general manager of institutional business at ABC.
“So far, there hasn’t been much senior management change at ABC-CA, and comparatively speaking their investment and management team has been stable,” Liu notes, “I think the company might lack a bit of vigour, but its development pace is quite stable.”