Foreign rivals hobbled by bank fees
For foreign fund managers targeting rich mainlanders, selling fund products in one of the world's fastest growing economies remains a difficult task.
A survey by PricewaterhouseCoopers released yesterday found that fund products sold in the retail market were charged between 70 and 75 per cent of the management fee - which is normally about 1 per cent of total assets under management - by the large state-owned banks, the main distributors of funds.
The survey comes from information compiled between April and June by executives of 30 foreign fund management firms on the mainland.
The better known local brands are charged just 50 per cent, making the foreign fund managers less competitive when it comes to pricing.
Mainland banks dominate selling channels for small investors' fund products while trust companies target high-net-worth individuals.
There were 36 foreign fund managers operating on the mainland, looking after a combined 1.067 trillion yuan (HK$1.3 trillion), as of June 30. Domestic fund managers, meanwhile, were in charge of about 1.265 trillion yuan worth of assets.
But fund growth has been sluggish and total assets under management have stayed the same for the past two years for foreign fund managers, according to PwC.
High commercial bank fees erode profits and some survey respondents did not expect a substantial increase in annual revenue growth this year.
The funds' performance has also been hampered by poor returns on mainland shares. The Shanghai Composite Index has lost 2.77 per cent since the start of the year while the Shenzhen Composite dropped 9.51 per cent.
Asset managers are expecting to benefit from Beijing's plan to allow foreign and Hong Kong investors to buy mainland stocks using yuan, which will enable them to launch new products. Vice-Premier Li Keqiang said earlier this month Hong Kong and foreign firms would have a quota of 20 billion yuan to invest in mainland stocks. The move is likely to benefit mainland funds with Hong Kong offices as they are expected to get approval before foreign firms.
10
The number of mainland fund managers that were operating in Hong Kong at the end of July, according to PwC
