A competitive break has occurred over the past year. A small group of global managers has shown that a genuine focus on building a well-diversified China business leads to results. Ample resources have been allocated, there is real support from HQ executives and the results are now very clear. Again though, these firms are the exception and by no means the rule. For the vast majority of global managers, the approach to China has continued to be one of caution. Such an approach may have been deemed prudent in the past, and may still be, but it does beg the question of where China – as a business endeavor – is to be prioritized.
Conditions for the year ahead are also set to pose formidable challenges to all global managers. Chinese policymakers have signaled a clear intention to pivot in favor of a more relaxed environment and are set to do so across the board. How, or even if, global managers choose to incorporate such wider market access, not to mention rising client demand for RMB asset classes, will be integral to the long-term makeup of the competitive landscape. Be it more expansive opportunities to control one’s destiny on the Mainland or a determination of what is to be done in reaction to more open inbound and outbound investment programs. What we can state with near certainty is that the competitive melee among global managers is set to intensify.
UBS is raising Chinese capital onshore via both its joint venture fund management company and its private fund business. Having this optionality has propelled it to the top of the onshore business ranking.
JP Morgan continued to build on its strong Mutual Recognition of Funds business in 2017 and is far ahead of its closest peers. This remains the main outbound investment channel for global managers to capture Chinese retail investor capital.
As global demand for China exposure grew in 2017, large active managers saw the biggest inflows. UBS topped our list. Strong positioning here is important because of the long-term inflows that MSCI A-share inclusion will bring.