For our 30 November 2021 Rotary talk on asset management we had as speaker Gian-Marc Widmer on the topic “Introduction to Chinese Asset and Fund Management Market”.
Our Rotary member Gian-Marc gave us an Introduction to Chinese Asset and Fund Management Market. Gian-Marc is the Director and Head of Cross-Border M&A at CITIC Securities since 2014. He has been focusing on M&A, restructuring and corporate development since 2001 with a track record of more than US$15bn of transactions executed in Europe, Asia and the Americas. Gian-Marc has been in China since 2005 and previously worked at Lazard in London and New York and at Altira Group as head of the China investment team in their renewable energy fund.
Summary of the presentation
(by Rtn Piper)
According to Gian-Marc, the asset under management AUM in China has grown ten folds to US$18 trillion in the past decade, and it is also going international. By comparison, Switzerland, Gian-Marc’s home country, has US$3-5 trillion under management and the US has US$48.6 trillion AUM, accounting for almost half of the world total. Gian-Marc presented his analysis by dissecting the value chain of investors, channels, fund managers, and assets, and how those four areas were being shaken up by the big trends in the industry.
The first such trend is pension reform, which is strengthening institutional investors. While individual retail investors still make up the bulk of the investor profile, pension reforms pushing for higher rates of returns are driving the establishment of more professionally managed pension funds. Pension funds only constitute 5% of the total asset market in China, as opposed to 34% in the global market.
Individual investors at the same time are being positively affected by the regulatory reforms and the proliferation of fintech instruments. Chinese banks with their vast branch networks had in the past nursed a large individual customer base with mostly off-balance sheet third-party wealth management products. Many of those products often went without government or regulatory oversight and have caused many unscrupulous practices often with disastrous consequences. The recent reforms have banned the banks from selling third-party products and thus have spurred the banks to set up their own fund management subsidiaries, accelerating the development of professional managers. Furthermore, since the introduction of fintech products, many fintech giants like Alipay and WeChat wallet have trapped one-third of the circulated cash away from the traditional banks. Still, with US$ 28 trillion in bank deposits, China has a largely untapped pool of money up for grabs by asset managers.
China’s potentially large fund market has long attracted foreign players. Along with the regulatory and pension reforms, China has finally paved the way for foreign players to enter the market. At the same time, it also is preparing to allow the Chinese money to leave the country into overseas funds. HK Connect or Greater Bay Area Wealth Management Connect was the first such pilot to allow Chinese investors to invest in funds in Hong Kong.
Professionally managed funds will be the future for China, and as with many other fast-moving markets in China, we will see a vastly different landscape in this financial sector. Gian-Marc was bullish about the future, both for foreign fund managers, as well as for individuals who are looking for baskets to put their eggs in.