AI100: Chinese asset managers on the march

AsianInvestor’s list of the top 100 fund houses in the region by assets under management (AUM) records the continued swift expansion of assets controlled by Chinese companies.

Eight of the bottom 25 asset managers on the list hailed from mainland China, and six of them recorded increases in AUM over the previous year’s totals, as local institutional investors outsource funds and more retail investors have begun seeking out professional fund houses.

The generally strong showing by mainland fund managers may in part reflect the fact that last year was a relatively benign, if unspectacular, market environment in China, particularly when compared to the tribulations of 2015. During the previous year the mainland stock market soared in the first half, only to implode in June and collapse, leaving many investors and fund managers in deep trouble.

The largest of the Chinese players in the bottom 25 was 78th-placed Dacheng Fund Management, which recorded an impressive 33% growth in AUM to $25.9 billion. However, even this performance paled next to that of HuaAn Fund Management, in 84th. Its AUM virtually doubled from $12.1 billion in 2015 to $23.8 billion last year.

Another company to register a major gain was HFT Investment Management. The company saw its AUM rise by 50.5% from $15.4 billion to $23.2 billion over the course of 2016.

Positive environment

The growth of Chinese asset managers looks set to continue, as the country’s pension industry slowly assigns more funds to be managed by private players, and more insurance firms outsource the assets they receive to external players for investment. Meanwhile international investors are increasingly looking to put money to work in China’s interbank bond market.

Further liberalisation such as the introduction of funds of funds also offer local managers new opportunity (although some wonder whether the sector is truly ready), while the desire of local investors to diversify into overseas assets means there is a lot of pent-up demand for offshore allocations.

Once the government relaxes the current capital controls and restrictions on qualified domestic institutional investor quotas, local fund managers will be able to tap some sizeable opportunities. Already, some of the Chinese fund houses are seeking to launch Ucits to attract international and local funds.

However, mainland firms face a growing challenge from international players setting up onshore wholly foreign-owned entities in China to service domestic clients. Some have privately expressed concerns on this front, as reported.

Indian improvement

Meanwhile, there were also a number of Indian fund managers in the bottom quartile of the AI100 rankings, all of which enjoyed AUM growth of at least 30% or so.

India’s asset management industry has enjoyed a strong year based on a vibrant economy, even though the stock market failed to greatly perform across the entire year, with the Sensex index only 1.78% up by year’s end. Despite this, local equity mutual funds witnessed net inflows of Rp60 billion ($14.86 billion) in the 2016-2017 fiscal year to March 31, according to the Economic Times.  

Birla Sun Life stood highest in 79th place, having posted a 34% rise to $25.4 billion. SBI Mutual Fund grew even faster, with its AUM expanding 39.5% to $24.8 billion. UTI Mutual Fund rounded out the list with 31.7% growth in AUM to $19.5 billion.

Only four of the bottom 25 saw AUM drops, two of which were from China. Fortune SG Fund Management, a joint-venture between Baosteel Group and France’s Societe Generale, saw its assets slide by a concerning 45% to $23 billion during 2016; a disappointing result given its big plans at the beginning of last year. And Aegon-Industrial Fund Management’s AUM fell 22.3% to $21 billion, despite the company enjoying the strongest performance by profit yield by March 2016.

Meanwhile emerging markets-focused Aberdeen Asset Management capped a torrid few years with a further 9.2% drop in regional AUM to $24.6 billion, as investors continued to favour developed markets. The firm's recently announced merger with Standard Life, also of the UK, ironically comes just as the world’s emerging markets look set to enjoy greater favour.

Singapore’s Lion Global Investors also had a year to forget, with its AUM falling 12% to $24 billion.

Look out for our next story on the AI100 in the coming days, which will reveal the fund managers ranked between 51 and 75.

*Estimate based on the industry average as company declined to break out its Asia-Pacific AUM to AsianInvestor

The full feature, including the entire AI 100 list in its entirety, appeared in the February/March issue of AsianInvestor magazine.