Despite lower economic growth and high volatility, the Chinese market remains attractive for asset managers. A strong economy, deregulation as well as product innovation drive the market’s expansion.
Roland Berger expects in their study “China: The new frontier for foreign asset managers” that the Chinese market for asset management is going to grow from 4.2 billion USD to 8.5 billion USD in 2020. One driver of this growth are strong fundamentals of the Chinese economy. With a lower growth in recent years, 6.9 percent of annual economic growth are more sustainable, says the study. With economic growth, income has risen by 35 percent in the last five years and twice as many households have an annual income of 30,000 US-Dollar or more. This income is invested: In 2014, 48 percent of the Chinese GDP have been saved and not consumed.
International asset managers can thereby profit from growth. While there were 93 international institutions allowed to trade with Chinese shares and bonds, i.e. are Qualified Foreign Institutional Investor, there are 279 today with three times as high assets under management.
Asset managers can thereby profit from new products for Chinese investors and new clients. Chinese investors were previously only diversified to a limited extent. For asset managers, this presents the opportunity to grow by product innovation. Money market funds have, for example, grown rapidly while alternatives are likely to be on a rise in the future, says the Roland Berger study. Moreover, a dynamic client structure provides an opportunity for growth. Pension funds and insurance mandates are, for example, growing fast.
Moreover, there are international opportunities for asset managers: Due to the disappointing performance and high volatility of Chinese A-shares, Chinese investors are demanding offshore investments. Despite, some international investors are demanding A-shares.