UBS Asset Management retained its position as the top-performing foreign fund house in China for a second year while three hedge fund managers also shot to prominence, the fourth annual analysis of the market published by Z-Ben Advisors showed.
The Shanghai consultancy ranked Invesco as the second-best foreign manager in the world’s fastest-growing asset management market, relegating JPMorgan Asset Management and Schroders to third and fourth places respectively.
China is expected to provide the largest single growth opportunity for global asset managers over the next decade but complex choices face international players that want to build a presence in a rapidly changing market that is forecast to grow from $5.3tn to $9tn by 2023.
Peter Alexander, Z-Ben’s managing director, said many global asset managers were “failing to adequately prioritise” their plans to address China’s investment market.
The threat of an all-out trade war between Washington and Beijing has prompted some international players to adopt a wait-and-see stance.
Mr Alexander said this was a serious strategic error that would allow far-sighted rivals to gain an edge.
Raymond Yin, head of China onshore at UBS and the first Asian to take on this role for the Swiss investment bank, said China was a top priority. “We expect China to take further steps to open up its capital markets which will present more growth opportunities for UBS and our joint venture partner SDIC [State Development & Investment Corp],” he said.
The Z-Ben ranking is a composite measure that evaluates the capabilities of international managers operating onshore in China via fund joint ventures and wholly foreign-owned entities. It also considers the scope and span of the Chinese investments that these managers provide to global investors, as well as their capacity to service Chinese clients’ demand for overseas asset classes.
BlackRock and Fidelity retained the fifth and sixth spots. The group of six has built a commanding lead over the chasing pack.
Hong Kong-based Value Partners vaulted up the ranks, from 14th to eighth and ahead of many larger rivals.
Au King Lun, chief executive of Value Partners, said assets in its China business rose 28 per cent last year to $1.1bn, helped by new mandates. “We also established our inaugural domestic Chinese private equity fund which will invest in the education sector,” he said.
Winton was a new entrant, jumping in at 15, while two other hedge funds — Bridgewater and Man Group — also made their first appearance in the top-25 ranking, along with asset managers First State Investments and Mirae.
“There is a clear willingness among hedge fund managers to take on more risks in building their China operations in contrast to the more cautious approach of some global asset managers,” said Mr Alexander.
Axa Investment Managers, Hang Seng, BEA Union Investment, Fullerton and Nikko AM were relegated from the ranking.
Regulators in Beijing introduced reforms in 2018 that will permit foreign players to apply for 51 per cent control of domestic fund management groups for the first time. The reforms led to speculation that acquisitions would follow rapidly but no deals have yet transpired.
Mr Alexander said a resolution to the US-China trade dispute would open the door for deals to proceed. Chinese regulators could also take further steps to liberalise local investment markets, possibly allowing foreign players to acquire 100 per cent ownership of local firms.
“It is a move that could come sooner than nearly all foreign firms are presently planning for,” he said.