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China’s fund managers’ AUM to hit USD3.9 trillion by 2020
Assets managed by Chinese fund management companies (FMCs) are likely to expand six-fold by 2020 to 24 trillion yuan (US$3.9 trillion) despite the challenge of low penetration the industry currently faces in the country, predicts management consulting firm Oliver Wyman.
Christina Wang 3 Sep 2014

Assets managed by Chinese fund management companies (FMCs) are likely to expand six-fold by 2020 to 24 trillion yuan (US$3.9 trillion) despite the challenge of low penetration the industry currently faces in the country, predicts management consulting firm Oliver Wyman.

 

With the Chinese people's strong tendency to save, more than 70% of financial assets in China are held in the form of deposits, says Christian Edelmann, the firm's head of Asia-Pacific. Given the competition from other financial classes such as wealth management, insurance and trust products, only 3% of the country's 145 trillion yuan financial assets are mutual funds, he points out.

 

While assets under management (AUM) of FMCs has grown from 900 billion yuan in 2005 to four trillion yuan in 2013, the median size of mutual funds has declined from 500 billion yuan to 400 billion yuan over the past eight years, with the peak of 6.4 trillion yuan in 2007, Oliver Wyman's data shows. FMCs can attract a large amount of assets through issuing new funds, thus the flow of existing funds was also high, Edelmann explains.

 

However, with the relaxation of investment constraints, tax incentives, pressure for higher yield and emerging client segments, institutional investors are expected to increase their investment in China's mutual fund sector. The threat of of inflation, broadening investment options and technological innovation are factors that will shift Chinese households from saving to investing, while the internationalization of the renminbi is believed to attract more international inflows for Chinese products.

 

These are the three key drivers that will support the exponential growth Chinese FMCs' AUM toward 2020, he notes, as it was projected 60% of the growth will come from retail investors, and the remaining 40% from institutions.

 

 

 

 

 

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