Why China’s savers could be the big winners as Beijing opens to global funds

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China’s US$20 trillion savings pool earning low returns in the banking system is a drawing card for global fund houses. Photo: AFP

Published: 9:04am, 21 May 2018Updated: 9:04am, 21 May 2018

China’s fund management industry will be reshaped by alternative investment strategies and risk management capabilities as global fund houses gain entry as wholly-owned enterprises for the first time in the nation’s modern history, according to fund experts.

A trio of global fund houses comprising Principal Global Investors, BlackRock and Investec say the private fund management (PFM) licence represents a major opening of China’s onshore market, which will bring positive benefits to the nation’s savers.

Among them, investors will have additional choices on how to invest, including more higher yielding products, according to fund experts speaking on the sidelines of JPMorgan Global China Summit last week.

Mark Wiseman, global head of active equities for BlackRock, said he considers the ability for foreign managers to access China under the PFM licence as the single largest business opportunity for BlackRock.

“With one of the highest saving rates in the world, a rising middle class, an ageing population and yet a country in the early stage of developing its social safety net such as pension and healthcare, there is a massive need for professional and reliable saving products in China,” he said. “Global asset managers and institutional investors alike can help bring more discipline to this market, which is still dominated by retail investors.”

In December 2017, BlackRock joined foreign fund houses Invesco, Schroders, Neuberger Berman, Fidelity, and Hong Kong-based Value Partners in attaining the status of a private securities investment manager under the PFM licence. In the past, foreign managers were restricted to taking a minority stake in a joint venture with a Chinese partner. However, the PFM licence allows foreign fund managers to launch private funds for up to 200 qualified investors.

The PFM licence also means Chinese investors can tap into more financial products, including those involving credit investing and alternative strategies, Wiseman said.