China’s asset management sector saw surging growth in 2016, despite a modest decline in revenues and profit rates for the global sector.
The “2017 Global Asset Management Report” just released by Boston Consulting Group indicates that last year the global asset management sector saw its first decline in both revenues and profits since the Great Financial Crisis.
While assets under management saw growth of 7% in 2016, revenues fell by 1% and profit rates declined by 2%.
In sharp contrast China’s asset management sector saw an increase in assets under management of 21% last year, with retail and institutional asset management achieving growth on the back of high household savings rates and the ongoing expansion of insurance companies and old age pension funds.
The robust growth rate of the asset management sector in China compares favourably with the United States, which saw growth of only 5% last year; Japan, where assets under management grew by only 3%, as well as the UK and Europe, where growth rates were 11% and 6% respectively.
The BCG report expects Beijing’s ongoing deleveraging campaign and crackdown on the financial sector to potentially hamper the future growth of the Chinese asset management sector.
While foreign capital has made inroads into China’s asset management market it remains hampered by a range of regulatory impediments.
These include a 49% cap on equity stakes in joint-venture enterprises, as well as rules that prevent licensed wholly foreign invested entities from targeting retail investors, and limit them to the provision of onshore privately offered fund products to institutions or high net-worth individuals.
The BCG report further points out that asset management products in China compete primarily on the basis of rates of return as opposed to stability, with domestic investors focused on products that can maximise short-term yields, instead of long-term stable revenues.