This week in asset owner history: Manulife facing two-speed China entry
Five years ago, Manulife inked a distribution tie-up with Agricultural Bank of China (ABC) that it hoped would help it to tap the individual retirement savings market in China.
The Canadian life insurer had spent over a year looking for a partner to set up an onshore pension joint venture.
The firm was in discussions with banks, including ABC, but regulatory question marks remained. “There is quite a lot of uncertainty within China as to how [the regulations on foreign JVs] would take shape and the timeline—that is a central issue,” Michael Dommermuth, Manulife Investment Management’s then president of international asset management, said back in 2017.
Forming such a company and securing the required regulatory approvals would enable Manulife to directly participate in the enterprise and occupation annuities market, said Dommermuth. It would also offer other retirement solutions.
At that time, Manulife already had a life insurance and asset management JV in China – Manulife-Sinochem Life and Manulife Teda Fund Management, respectively. And it saw pensions as another logical step, especially as the country's public pension fund reforms gathered pace.
In November 2017, the life insurer announced the establishment of a wholly foreign-owned enterprise (WFOE), the Manulife Overseas Investment Fund Management (Shanghai), to facilitate offshore investment in mainland China and attract Chinese institutions to invest offshore.
After China approved the launch of pension target funds in the mutual fund space in 2018, Manulife Teda was among the first pension target fund of funds (FOF) managers.
Fast forward to November 21, 2022, the firm announced that it has gained regulatory approval to acquire 51% of the shares in Manulife TEDA Fund Management from its JV partner, taking its ownership stake to 100%.
“We are excited by the opportunity to continue to provide both institutional and individual investors in China with professional products and services, supporting the development and growth of China’s pension system, and helping Chinese people to meet their growing needs for retirement planning,” said Paul Lorentz, president and chief executive officer, global wealth and asset management at Manulife Investment Management.
Dommermuth, now head of wealth and asset management for Asia at Manulife Investment Management, said: “This is an important milestone for us, as it means we will have direct access to China’s large and fast-growing retail fund market.”
Two weeks later on December 9, Fidelity International also announced that its wholly foreign-owned enterprise (WFOE), FIL Fund Management (China) Company, has been given the regulatory go-ahead to establish a wholly-owned onshore mutual fund business in China, enabling it to offer onshore investment and retirement solutions to both retail and institutional clients in the country.
Mutual funds are one of the major investment vehicles under China’s newly established private pension scheme, or the third pillar, in the country’s pension system.
By gaining the recent regulatory approvals, both Manulife and Fidelity will join BlackRock, which became China’s first wholly foreign-owned mutual fund manager in 2021, to have direct access to the country’s trillion-dollar private pension business.