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China asset management market finished 2021 with strong growth in and has become the world's second largest asset management onshore. In an increasingly competitive market and a constantly changing regulatory environment, EY has given the advice to seize opportunities and face challenges.
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Read moreTotal Asset under Management (AUM) by the members of Asset Management Association of China (AMAC) stood at RMB68 trillion, or US$10.79 trillion, at the end of 2021. By our estimates, China now is the world’s fourth largest asset management market, after the US, Luxembourg, and Ireland. It is also the second largest onshore market, next only to the US.
Compared with 2020, industry’s AUM has grown by 15.25%, the fastest in six years. Most of the growth was achieved on the back of sustained demand for mutual funds and private funds, as well as the capital appreciation of equity-centric products.
While the mutual fund and private fund business have seen strong growth, other sectors of the industry have been stagnating, if not shrinking. The most flagrant are the separate account business. Since the introduction of the New Asset Management Rules, which urges any kind of the pass-through business to be wound down, FMC and securities firms’ separate account business has been in decline.
AMAC members aside, more financial institutions are moving into the asset management business.
We expect the AUM growth of China’s asset management industry to accelerate, though in the immediate future mutual funds and private funds might need some time to regroup, after years of neck-breaking growth.
The entrance of the new investors, as well as increasing sophistication of the incumbent ones means that Chinese investors’ demand for their asset managers is becoming also higher. We think the higher demands will be felt the most in three areas: advice, digital engagement, and sustainable investments.
The promises of the industry attract new entrants. FMC, as the most versatile and most open asset management platform, attracts the most. Private fund industry will also attract more entrants, as the AUM continues to grow. But compared with the mutual fund industry, private funds will remain a more accommodating theatre for new and small managers. At the periphery of the asset management industry, trust companies, insurance AMCs, and WMCs will also continue to fight for third-party assets in their own way, while seeking the necessary licenses that will recognize their legitimacy.
Regulation leads asset management companies to face new situations and challenges. Chinese asset management companies should actively try new development models and strategic transformations while striving for excellence in their own businesses.
