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4:23 am
Jul 3, 2013
Asia

Australia’s AMP, China Life to Launch Mutual Fund in China

Article

By WSJ Staff
—Bloomberg News
Launching a mutual fund in China may be better late than never for Australia’s AMP Ltd. , which may finally be getting into the game.

AMP is teaming up with China Life Insurance Co. to launch a mutual fund in China, a person familiar with the matter said Wednesday, as the financial group seeks to tap into growing demand for investment products in Asia’s largest economy.

AMP will own a stake of up to 49% in the venture, the person said, adding that the two parties have signed an agreement and have sought approval from China’s financial regulators for the venture.

It wasn’t immediately clear how much each party would invest in the venture and when the fund would be launched.

AMP, in an emailed response on Wednesday, said that it doesn’t comment on market speculation. China Life, the country’s largest insurance group by premiums, didn’t immediately respond to queries.

AMP becomes the latest foreign player to seek a role in China’s burgeoning financial markets. Morgan Stanley, JPMorgan Chase & Co. and HSBC Holdings PLC already have mutual-fund joint ventures in China.

China’s mutual-fund industry has boomed in recent years as investors seek more complex financial products to boost their investment returns amid an environment of low interest rates and rising inflation.

As of end-May, assets in the mutual-fund industry totaled 3.98 trillion yuan ($650 billion), equivalent to 4% of deposits in the banking system, managed by 81 asset management companies, according to the Asset Management Association of China. The figure may exceed 15 trillion yuan by 2020, said Z-ben Advisor, a Shanghai-based consultancy with a focus on securities investment.

By teaming up with China Life, AMP can tap into the Chinese insurer’s massive client base. China Life had about 150 million insurance policies and managed about 1.80 trillion yuan of assets at the end of 2012, financial statements showed.

AMP’s move is also likely aimed at deepening a seven-year business relationship with China Life. In 2006, AMP received a qualified foreign institutional investor licence to trade in China’s yuan-denominated A-shares, with China Life Asset Management Co.–an investment unit of China Life–acting as the local investment adviser.

Still, analysts have said China’s sagging stock markets and the surge in wealth-management products will pose a challenge to the mutual-fund industry. The benchmark Shanghai Composite Index has lost 13% so far this year and has fallen nearly 70% from its all-time high of 6124 hit in October 2007.

Z-ben said in a recent note that profit margins in the mutual-fund industry were squeezed further last year, as management fees took a hit due to volatile markets. Total profits in the industry dropped to 7.03 billion yuan last year from 8.36 billion yuan in 2011, it said.

http://blogs.wsj.com/moneybeat/2013/07/03/australias-amp-china-life-to-launch-mutual-fund-in-china/