Chinese asset managers have 748 billion renminbi (€89 billion) in assets under management beyond their core mutual fund business, according to figures that reveal the size of the industry for the first time.
The figure is equal to a fifth of total assets under management and industry analysts say this sum has risen rapidly in the past few years, even though fees for the “non-core” market segments which the figure relates to are lower than for public funds.
The data on non-core assets from the Asset Management Association of China (AMAC) is the first of its kind to be released to the public, and allows analysts to make an accurate estimate for the true size of the Chinese asset management industry.
According to Shanghai-based consultancy Z-Ben Advisors, there were 2.8 trillion renminbi in China's publicly managed mutual funds at the end of 2012, which in addition to non-core assets gives a total for the industry of 3.5 trillion renminbi.
This sum, equivalent to €420 billion, is far below assets under management in developed markets such as the United States and Europe, in which some single companies manage more than €1 trillion. But it puts China in a similar league to the likes of Brazil, which has $900 billion (€674 billion) under management, according to the Brazilian Financial and Capital Markets Association.
Non-core assets in the Chinese industry consist of segregated accounts, private pension schemes called enterprise annuities and mandates from the National Council for Social Security Fund (NCSSF), which oversees a government fund for social security.
NCSSF mandates account for about half of non-core assets, according to AMAC, with the rest split evenly between segregated accounts and enterprise annuities.
Some asset managers have concentrated on building up their non-core assets in recent months. HFT Investment Management had nearly half its total assets under management in non-core assets at the end of 2012, the result of an aggressive focus on building an enterprise annuity platform. Another firm, Bosera Asset Management, had 40% in non-core assets owing to NCSSF mandates and enterprise annuity accounts.
Bosera has 86 billion renminbi in non-core assets, according to AMAC, second only to Harvest Fund Management, which has 93 billion renminbi.
Z-Ben Advisors says the proportion of industry assets in non-core assets will grow in the next few years. However, fees on these assets are lower than on funds.
“At present, fees remain much higher on public funds than in any of the non-core segments, meaning that managers choosing to specialise in non-core business will need a higher threshold for assets under management in order to realise similar levels of profitability,” says the firm in an analyst note.
As a result, ranking Chinese asset managers by their total assets under management will become less useful as a guide for predicting profitability, says the consultancy.
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